UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2024

  

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

Commission File Number: 814-01393

 

Kayne DL 2021, Inc. 

  

Delaware   86-2440860
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
717 Texas AvenueSuite 2200, Houston, TX   77002
(Address of principal executive offices)   (Zip Code)

 

(713) 493-2020

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: 

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None   None   None

  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☐ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company 
Emerging growth company     

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes  No

 

As of November 7, 2024, the registrant had 51,812 shares of common stock, $0.001 par value per share, issued and outstanding and there was no public market for the registrant’s shares.

 

 

 

 

 

Table of Contents

 

    Page
PART I. FINANCIAL INFORMATION 1
Item 1. Consolidated Financial Statements 1
  Consolidated Statements of Assets and Liabilities as of September 30, 2024 (Unaudited) and December 31, 2023 1
  Consolidated Statement of Operations for the three and nine months ended September 30, 2024 and 2023 (Unaudited) 2
  Consolidated Statement of Changes in Net Assets for the three and nine months ended September 30, 2024 and 2023 (Unaudited) 3
  Consolidated Statement of Cash Flows for the nine months ended September 30, 2024 and 2023 (Unaudited) 4
  Consolidated Schedule of Investments as of September 30, 2024 (Unaudited) and December 31, 2023 5
  Notes to Financial Statements (Unaudited) 18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34
Item 3. Quantitative and Qualitative Disclosures About Market Risk 43
Item 4. Controls and Procedures 43
     
PART II.  OTHER INFORMATION 44
Item 1. Legal Proceedings 44
Item 1A. Risk Factors 44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 44
Item 3. Defaults Upon Senior Securities 44
Item 4. Mine Safety Disclosures 44
Item 5. Other Information 44
Item 6. Exhibits 45
     
Signatures 46

 

i

 

Forward-Looking Statements

 

This quarterly report on Form 10-Q contains forward-looking statements that involve substantial known and unknown risks, uncertainties and other factors. Undue reliance should not be placed on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about the company, current and prospective portfolio investments, the industry, beliefs and assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond control of Kayne DL 2021, Inc. (“the Company”) and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:

 

  future operating results;

 

  business prospects and the prospects of portfolio companies in which we invest;
     
  the ability of our portfolio companies to achieve their objectives;

 

  changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets;

 

  the ability of KA Credit Advisors II, LLC (our “Advisor”) to locate suitable investments and to monitor and administer investments;

 

  the ability of the Advisor and its affiliates to attract and retain highly talented professionals;

 

  risk associated with possible disruptions in operations or the economy generally;
     
  the adequacy of our cash resources, financing sources and working capital;

 

  the timing of cash flows, distributions and dividends, if any, from the operations of the companies in which the Company invests;

 

  the ability to maintain qualification as a business development company (“BDC”) and as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”);

 

  the use of borrowed money to finance a portion of the Company’s investments;

 

  the adequacy, availability and pricing of financing sources and working capital for the Company;

  

  actual or potential conflicts of interest with the Advisor and its affiliates;

 

  contractual arrangements and relationships with third parties;

 

  the risk associated with an economic downturn, increased inflation, political instability, interest rate volatility, loss of key personnel, and the illiquid nature of investments of the Company; and

 

  the risks, uncertainties and other factors the Company identifies under “Item 1A. Risk Factors” and elsewhere in this quarterly report on Form 10-Q, as well as in the Company’s annual report on Form 10-K for the year ended December 31, 2023.

 

We have based the forward-looking statements included in this report on information available to us on the date of this report. We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Although we undertake no obligation to revise or update any forward-looking statements, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the United States Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, registration statements on Form 10, quarterly reports on Form 10-Q and current reports on Form 8-K.

 

ii

 

PART I—FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements.

 

Kayne DL 2021, Inc.

Consolidated Statements of Assets and Liabilities

(amounts in 000’s, except share and per share amounts)

 

   September 30,
2024
(Unaudited)
   December 31,
2023
 
Assets:        
Investments, at fair value:        
Long-term investments (amortized cost of $243,372 and $174,235)  $247,764   $177,526 
Short-term investments (amortized cost of $2,076 and $4,715)   2,076    4,715 
Cash and cash equivalents   2,043    5,887 
Receivable for principal payments on investments   79    13 
Interest receivable   2,879    1,563 
Prepaid expenses and other assets   12    115 
Total Assets  $254,853   $189,819 
           
Liabilities:          
Subscription Credit Facility (Note 6)  $-   $- 
Unamortized Subscription Credit Facility issuance costs   (32)   (11)
Distributions payable   7,729    4,659 
Management fee payable   446    306 
Accrued expenses and other liabilities   341    300 
Accrued excise tax expense   -    14 
Total Liabilities  $8,484   $5,268 
           
Commitments and contingencies (Note 8)   
 
    
 
 
           
Net Assets:          
Common Shares, $0.001 par value; 100,000 shares authorized; 46,840 and 35,293 as of September 30, 2024 and December 31, 2023, respectively, issued and outstanding  $-   $- 
Additional paid-in capital   242,094    181,115 
Total distributable earnings (deficit)   4,275    3,436 
Total Net Assets  $246,369   $184,551 
Total Liabilities and Net Assets  $254,853   $189,819 
Net Asset Value Per Common Share  $5,260   $5,229 

 

See accompanying notes to consolidated financial statements.

 

1

 

Kayne DL 2021, Inc.

Consolidated Statements of Operations

(amounts in 000’s, except share and per share amounts)

(Unaudited)

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2024   2023   2024   2023 
Income:                
Investment income from investments:                
Interest income  $7,585   $4,530   $20,461   $12,123 
Dividend income   73    179    331    204 
Total Investment Income   7,658    4,709    20,792    12,327 
                     
Expenses:                    
Interest expense   35    36    124    180 
Management fees   446    270    1,193    745 
Professional fees   90    102    274    266 
Directors fees   40    37    118    110 
Other general and administrative expenses   90    101    311    283 
Total Expenses   701    546    2,020    1,584 
Net Investment Income (Loss)   6,957    4,163    18,772    10,743 
                     
Realized and unrealized gains (losses) on investments                    
Net realized gains (losses):                    
Investments   -    -    -    - 
Total net realized gains (losses)   -    -    -    - 
Net change in unrealized gains (losses):                    
Investments   340    120    1,101    491 
Total net change in unrealized gains (losses)   340    120    1,101    491 
Total realized and unrealized gains (losses)   340    120    1,101    491 
                     
Net Increase (Decrease) in Net Assets Resulting from Operations  $7,297   $4,283   $19,873   $11,234 
                     
Per Common Share Data:                    
Basic and diluted net investment income per common share  $149   $141   $444   $412 
Basic and diluted net increase in net assets resulting from operations  $156   $145   $470   $430 
Weighted Average Common Shares Outstanding - Basic and Diluted   46,712    29,515    42,307    26,096 

 

See accompanying notes to consolidated financial statements.

 

2

 

Kayne DL 2021, Inc.

Consolidated Statements of Changes in Net Assets

(amounts in 000’s)

(Unaudited)

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2024   2023   2024   2023 
Increase (Decrease) in Net Assets Resulting from Operations:                
Net investment income (loss)  $6,957   $4,163   $18,772   $10,743 
Net realized gains (losses) on investments   -    -    -    - 
Net change in unrealized gains (losses) on investments   340    120    1,101    491 
Net Increase (Decrease) in Net Assets Resulting from Operations   7,297    4,283    19,873    11,234 
                     
Decrease in Net Assets Resulting from Stockholder Dividends                    
Dividends to stockholders   (7,729)   (4,151)   (19,034)   (10,670)
Net Decrease in Net Assets Resulting from Stockholder Dividends   (7,729)   (4,151)   (19,034)   (10,670)
                     
Increase in Net Assets Resulting from Capital Share Transactions                    
Issuance of common shares   25,000    25,000    50,000    50,000 
Reinvestment of dividends   854    3,533    10,979    8,206 
Net Increase in Net Assets Resulting from Capital Share Transactions   25,854    28,533    60,979    58,206 
Total Increase (Decrease) in Net Assets   25,422    28,665    61,818    58,770 
Net Assets, Beginning of Period   220,947    136,013    184,551    105,908 
Net Assets, End of Period  $246,369   $164,678   $246,369   $164,678 

  

See accompanying notes to consolidated financial statements.

 

3

 

Kayne DL 2021, Inc.

Consolidated Statements of Cash Flows

(amounts in 000’s)

(Unaudited)

 

   For the nine months ended
September 30,
 
   2024   2023 
         
Cash Flows from Operating Activities:        
Net increase (decrease) in net assets resulting from operations  $19,873   $11,234 
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:          
Net realized (gains)/losses on investments   -    - 
Net change in unrealized (gains)/losses on investments   (1,101)   (491)
Net accretion of discount on investments   (1,114)   (648)
Sales (purchases) of short-term investments, net   2,639    (20,409)
Purchases of portfolio investments   (84,387)   (44,326)
Proceeds from sales of investments and principal repayments   16,447    7,085 
Paid-in-kind interest from portfolio investments   (83)   - 
Amortization of deferred financing cost   58    68 
Increase/(decrease) in operating assets and liabilities:          
(Increase)/decrease in interest and dividends receivable   (1,316)   (413)
(Increase)/decrease in receivable for principal payments on investments   (66)   10 
(Increase)/decrease in prepaid expenses and other assets   103    90 
Increase/(decrease) in payable for investments purchased   -    (137)
Increase/(decrease) in management fees payable   140    115 
Increase/(decrease) in excise tax payable   (14)   - 
Increase/(decrease) in accrued other general and administrative expenses   41    3 
Net cash used in operating activities   (48,780)   (47,819)
Cash Flows from Financing Activities:          
Borrowings/(payments) on subscription credit facility, net   -    (750)
Payments of debt issuance costs   (79)   (55)
Dividends paid in cash   (4,985)   (81)
Proceeds from issuance of common shares   50,000    50,000 
Net cash provided by financing activities   44,936    49,114 
Net increase (decrease) in cash and cash equivalents   (3,844)   1,295 
Cash and cash equivalents, beginning of period   5,887    715 
Cash and cash equivalents, end of period  $2,043   $2,010 
           
Supplemental and Non-Cash Information:          
Interest paid during the period  $66   $111 
Non-cash financing activities not included herein consisted of reinvestment of dividends  $10,979   $8,206 

 

See accompanying notes to consolidated financial statements.

 

4

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of September 30, 2024

(amounts in 000’s, except number of shares, units)

(Unaudited)

 

Portfolio Company(1)  Footnotes  Investment  Interest Rate   Spread   PIK Rate   Reference(2)  Maturity
Date
  Principal
/Par
  

Amortized

Cost(3)(4)

   Fair
Value
   Percentage
of Net Assets
 
Debt Investments                                        
Aerospace & defense                                        
Basel U.S. Acquisition Co., Inc. (IAC)  (5)  First lien senior secured revolving loan   10.49%   5.50%         -   SOFR(Q)  12/5/2028  $-   $-    

$

-    0.0%
      First lien senior secured loan   10.49%   5.50%   -   SOFR(Q)  12/5/2028   5,124    5,022    5,125    2.1%
      First lien senior secured delayed draw loan   10.49%   5.50%   -   SOFR(Q)  7/8/2026   -    -    -    0.0%
Precinmac (US) Holdings, Inc.     First lien senior secured loan   10.95%   6.00%   -   SOFR(M)  8/31/2027   279    275    279    0.1%
Vitesse Systems Parent, LLC     First lien senior secured loan   10.21%   7.00%   -   SOFR(M)  12/22/2028   5,912    5,782    5,897    2.4%
      First lien senior secured revolving loan   11.96%   7.00%   -   SOFR(M)  12/22/2028   782    765    780    0.3%
                               12,097    11,844    12,081    4.9%
Automobile components                                               
Speedstar Holding LLC     First lien senior secured loan   11.32%   6.00%   -   SOFR(Q)  7/22/2027   1,022    1,009    1,022    0.4%
      First lien senior secured delayed draw loan   11.32%   6.00%   -   SOFR(Q)  7/2/2026   -    -    -    0.0%
Vehicle Accessories, Inc.     First lien senior secured loan   10.21%   5.25%   -   SOFR(M)  11/30/2026   3,836    3,793    3,836    1.6%
      First lien senior secured revolving loan   10.21%   5.25%   -   SOFR(M)  11/30/2026   -    -    -    0.0%
WAM CR Acquisition, Inc. (Wolverine)     First lien senior secured loan   11.53%   6.25%   -   SOFR(Q)  7/23/2029   5,092    4,992    5,143    2.1%
                               9,950    9,794    10,001    4.1%
Biotechnology                                               
Alcami Corporation (Alcami)     First lien senior secured delayed draw loan   12.21%   7.00%   -   SOFR(M)  12/21/2028   297    284    303    0.1%
      First lien senior secured revolving loan   12.21%   7.00%   -   SOFR(Q)  12/21/2028   -    -    -    0.0%
      First lien senior secured loan   12.21%   7.00%   -   SOFR(Q)  12/21/2028   4,038    3,929    4,119    1.7%
                               4,335    4,213    4,422    1.8%
Building products                                               
Ruff Roofers Buyer, LLC     First lien senior secured loan   10.35%   5.50%   -   SOFR(M)  11/19/2029   1,607    1,552    1,607    0.7%
      First lien senior secured revolving loan   10.35%   5.50%   -   SOFR(M)  11/19/2029   -    -    -    0.0%
      First lien senior secured delayed draw loan   10.35%   5.50%   -   SOFR(M)  11/19/2029   862    854    862    0.3%
      First lien senior secured delayed draw loan   10.35%   5.50%   -   SOFR(M)  11/17/2025   -    -    -    0.0%
US Anchors Group, Inc. (Mechanical Plastics Corp.)     First lien senior secured loan   9.60%   5.00%   -   SOFR(Q)  7/15/2029   2,905    2,837    2,905    1.2%
      First lien senior secured revolving loan   9.60%   5.00%   -   SOFR(Q)  7/15/2029   -    -    -    0.0%
                               5,374    5,243    5,374    2.2%
Capital markets                                               
Atria Wealth Solutions, Inc.     First lien senior secured delayed draw loan   12.10%   6.50%   -   SOFR(M)  11/29/2024   2,975    2,971    2,975    1.2%
Chemicals                                               
Shrieve Chemical Company, LLC     First lien senior secured loan   11.86%   6.38%   -   SOFR(M)  12/2/2024   4,127    4,120    4,126    1.7%
Commercial services & supplies                                               
Advanced Environmental Monitoring, Inc.     First lien senior secured loan   11.21%   6.00%   -   SOFR(Q)  1/29/2027   3,000    2,971    3,000    1.2%
Allentown, LLC     First lien senior secured loan   11.21%   6.00%   -   SOFR(Q)  4/22/2027   2,236    2,225    2,175    0.9%
      First lien senior secured delayed draw loan   11.21%   6.00%   -   SOFR(Q)  4/22/2027   404    400    393    0.2%
      First lien senior secured revolving loan   13.00%   5.00%   -   PRIME  4/22/2027   197    197    191    0.1%
American Equipment Holdings LLC     First lien senior secured loan   11.03%   6.00%   -   SOFR(M)  11/5/2026   157    157    157    0.1%
      First lien senior secured loan   11.70%   6.00%   -   SOFR(S)  11/5/2026   601    581    601    0.2%
      First lien senior secured delayed draw loan   11.71%   6.00%   -   SOFR(S)  11/5/2026   4,932    4,878    4,933    2.0%
      First lien senior secured revolving loan   11.21%   6.00%   -   SOFR(M)  11/5/2026   190    175    190    0.1%
BLP Buyer, Inc. (Bishop Lifting Products)     First lien senior secured loan   10.60%   5.75%   -   SOFR(M)  12/22/2029   5,152    5,062    5,165    2.1%
      First lien senior secured delayed draw loan   10.60%   5.75%   -   SOFR(M)  12/22/2029   602    591    604    0.2%
      First lien senior secured revolving loan   10.60%   5.75%   -   SOFR(M)  12/22/2029   52    39    52    0.0%
Diverzify Intermediate LLC     First lien senior secured loan   11.07%   5.75%   -   SOFR(M)  5/11/2027   1,554    1,516    1,523    0.6%
      First lien senior secured delayed draw loan   11.07%   5.75%   -   SOFR(M)  4/4/2026   -    -    -    0.0%
                               19,077    18,792    18,984    7.70%

 

See accompanying notes to consolidated financial statements.

 

5

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of September 30, 2024

(amounts in 000’s, except number of shares, units)

(Unaudited)

 

Portfolio Company(1)  Footnotes  Investment  Interest Rate   Spread   PIK Rate   Reference(2)  Maturity
Date
  Principal
/Par
  

Amortized

Cost(3)(4)

   Fair
Value
   Percentage
of Net Assets
 
Containers & packaging                                        
Carton Packaging Buyer, Inc. (Century Box)    First lien senior secured loan   11.56%   6.25%   -   SOFR(S)  10/30/2028   5,404    5,270    5,404    2.2%
      First lien senior secured revolving loan   11.56%   6.25%   -   SOFR(S)  10/30/2028   -    -    -    0.0%
Drew Foam Companies, Inc.     First lien senior secured loan   11.43%   6.00%   -   SOFR(Q)  12/5/2026   -    -    -    0.0%
      First lien senior secured loan   11.43%   6.00%   -   SOFR(Q)  12/5/2026   2,839    2,808    2,839    1.2%
FCA, LLC (FCA Packaging)     First lien senior secured loan   11.63%   6.50%   -   SOFR(S)  7/18/2028   2,012    1,992    2,012    0.8%
      First lien senior secured loan   10.35%   5.75%   -   SOFR(Q)  7/18/2028   287    279    290    0.1%
      First lien senior secured revolving loan   10.35%   5.75%   -   SOFR(S)  7/18/2028   -    -    -    0.0%
Innopak Industries, Inc.     First lien senior secured loan   11.46%   6.25%   -   SOFR(M)  3/5/2027   5,584    5,487    5,584    2.3%
The Robinette Company     First lien senior secured loan   11.06%   6.00%   -   SOFR(Q)  5/10/2029   2,192    2,150    2,235    0.9%
      First lien senior secured revolving loan   11.06%   6.00%   -   SOFR(Q)  5/10/2029   258    237    263    0.1%
      First lien senior secured delayed draw loan   11.06%   6.00%   -   SOFR(Q)  11/10/2025   -    -    -    0.0%
                               18,576    18,223    18,627    7.6%
Diversified telecommunication services                                               
Network Connex (f/k/a NTI Connect, LLC)     First lien senior secured loan   9.75%   5.00%   -   SOFR(Q)  1/31/2026   2,564    2,519    2,564    1.0%
                                                
Food products                                               
BR PJK Produce, LLC (Keany)     First lien senior secured loan   11.73%   6.25%   -   SOFR(Q)  11/14/2027   4,700    4,626    4,700    1.9%
      First lien senior secured loan   11.31%   6.25%   -   SOFR(Q)  11/14/2027   721    706    721    0.3%
      First lien senior secured delayed draw loan   11.73%   6.25%   -   SOFR(Q)  11/14/2027   339    322    339    0.1%
      First lien senior secured delayed draw loan   11.73%   6.25%   -   SOFR(Q)  11/14/2027   227    227    227    0.1%
CCFF Buyer, LLC (California Custom Fruits & Flavors, LLC)     First lien senior secured loan   10.07%   5.00%   -   SOFR(Q)  2/26/2030   2,637    2,556    2,650    1.1%
      First lien senior secured delayed draw loan   10.07%   5.00%   -   SOFR(Q)  2/26/2026   -    -    -    0.0%
      First lien senior secured revolving loan   10.07%   5.00%   -   SOFR(Q)  2/26/2030   -    -    -    0.0%
City Line Distributors, LLC     First lien senior secured loan   10.96%   6.00%   -   SOFR(M)  8/31/2028   1,860    1,822    1,878    0.8%
      First lien senior secured delayed draw loan   11.23%   6.00%   -   SOFR(M)  8/31/2028   762    746    770    0.3%
      First lien senior secured revolving loan   10.96%   6.00%   -   SOFR(M)  8/31/2028   -    -    -    0.0%
Gulf Pacific Holdings, LLC     First lien senior secured loan   10.95%   6.00%   -   SOFR(M)  9/29/2028   1,717    1,693    1,682    0.7%
      First lien senior secured delayed draw loan   11.45%   6.00%   -   SOFR(Q)  9/29/2028   145    145    142    0.1%
      First lien senior secured revolving loan   11.26%   6.00%   -   SOFR(M)  9/29/2028   360    352    352    0.1%
IF&P Foods, LLC (FreshEdge)     First lien senior secured loan   10.99%   5.63%   -   SOFR(S)  10/3/2028   3,863    3,793    3,863    1.6%
      First lien senior secured loan   11.36%   6.00%   -   SOFR(S)  10/3/2028   97    95    97    0.0%
      First lien senior secured loan   10.48%   5.25%   -   SOFR(S)  10/3/2028   119    114    119    0.0%
      First lien senior secured delayed draw loan   10.99%   5.63%   -   SOFR(S)  10/3/2028   574    564    574    0.2%
      First lien senior secured revolving loan   10.80%   5.63%   -   SOFR(Q)  10/3/2028   165    152    165    0.1%
J&K Ingredients, LLC     First lien senior secured loan   11.10%   6.50%   -   SOFR(M)  11/16/2028   2,904    2,841    2,962    1.2%
ML Buyer, LLC (Mama Lycha Foods, LLC)     First lien senior secured loan   10.70%   5.75%   -   SOFR(Q)  9/7/2029   2,551    2,483    2,551    1.0%
      First lien senior secured revolving loan   10.70%   5.75%   -   SOFR(Q)  9/7/2029   -    -    -    0.0%
Siegel Egg Co., LLC     First lien senior secured loan   13.93%   6.50%   2.00%  SOFR(Q)  12/29/2026   2,323    2,305    1,998    0.8%
      First lien senior secured revolving loan   13.93%   6.50%   2.00%  SOFR(Q)  12/29/2026   416    412    358    0.1%

 

See accompanying notes to consolidated financial statements.

 

6

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of September 30, 2024

(amounts in 000’s, except number of shares, units)

(Unaudited)

 

Portfolio Company(1)  Footnotes  Investment  Interest Rate   Spread   PIK Rate    Reference(2)  Maturity
Date
   Principal
/Par
  

Amortized

Cost(3)(4)

   Fair
Value
   Percentage
of Net Assets
Worldwide Produce Acquisition, LLC    First lien senior secured delayed draw loan   10.85%   6.25%       -    SOFR(M)   1/18/2029    556    544    551   0.2%
      First lien senior secured delayed draw loan   10.96%   6.25%   -    SOFR(M)   1/18/2029    462    429    457   0.2%
      First lien senior secured revolving loan   11.10%   6.25%   -    SOFR(M)   1/18/2029    -    -    -   0.0%
      First lien senior secured loan   11.10%   6.25%   -    SOFR(M)   1/18/2029    2,838    2,773    2,810   1.1%
                                  30,336    29,700    29,966   12.0%
Health care providers & services                                             
Brightview, LLC     First lien senior secured loan   10.96%   6.00%   -    SOFR(M)   12/14/2026    2,151    2,145    2,129   0.9%
      First lien senior secured delayed draw loan   10.96%   6.00%   -    SOFR(M)   12/14/2026    287    286    284   0.1%
      First lien senior secured revolving loan   10.96%   6.00%   -    SOFR(M)   12/14/2026    130    130    129   0.1%
Guardian Dentistry Partners, LLC     First lien senior secured loan   10.46%   5.50%   -    SOFR(M)   8/20/2026    788    776    788   0.3%
      First lien senior secured delayed draw loan   10.46%   5.50%   -    SOFR(M)   8/20/2026    1,419    1,400    1,419   0.6%
      First lien senior secured revolving loan   10.46%   5.50%        SOFR(M)   8/20/2027    -    -    -   0.0%
Guided Practice Solutions: Dental, LLC (GPS)     First lien senior secured delayed draw loan   11.21%   6.25%   -    SOFR(M)   12/29/2025    5,316    5,215    5,316   2.2%
Light Wave Dental Management LLC     First lien senior secured revolving loan   11.60%   7.00%   -    SOFR(Q)   6/30/2029    681    660    688   0.3%
      First lien senior secured loan   11.60%   7.00%   -    SOFR(Q)   6/30/2029    6,160    6,014    6,222   2.5%
MVP VIP Borrower, LLC     First lien senior secured loan   11.10%   6.50%   -    SOFR(Q)   1/3/2029    4,024    3,936    4,064   1.6%
      First lien senior secured delayed draw loan   11.10%   6.50%   -    SOFR(M)   1/3/2029    325    318    328   0.1%
Refocus Management Services, LLC     First lien senior secured loan   11.40%   6.00%   -    SOFR(Q)   2/14/2029    3,575    3,494    3,575   1.5%
      First lien senior secured delayed draw loan   11.20%   6.00%   -    SOFR(Q)   2/14/2029    406    379    406   0.2%
      First lien senior secured revolving loan   11.40%   6.00%   -    SOFR(Q)   2/14/2029    -    -    -   0.0%
Salt Dental Collective, LLC     First lien senior secured delayed draw loan   11.70%   6.75%   -    SOFR(M)   12/20/2024    556    528    556   0.2%
                                  25,818    25,281    25,904   10.6%
Health care equipment & supplies                                                
LSL Industries, LLC (LSL Healthcare)     First lien senior secured loan   12.32%   7.00%   -    SOFR(Q)   11/3/2027    1,661    1,618    1,628   0.7%
      First lien senior secured delayed draw loan   12.32%   7.00%   -    SOFR(Q)   11/3/2024    -    -    -   0.0%
      First lien senior secured revolving loan   12.32%   7.00%   -    SOFR(Q)   11/3/2027    -    -    -   0.0%
                                  1,661    1,618    1,628   0.7%
Insurance                                             
Allcat Claims Service, LLC     First lien senior secured loan   10.75%   6.00%   -    SOFR(Q)   7/7/2027    656    648    656   0.3%
      First lien senior secured delayed draw loan   10.75%   6.00%   -    SOFR(Q)   7/7/2027    1,838    1,812    1,838   0.7%
      First lien senior secured revolving loan   10.75%   6.00%   -    SOFR(Q)   7/7/2027    -    -    -   0.0%
                                  2,494    2,460    2,494   1.0%
IT services                                                
Domain Information Services Inc. (Integris)     First lien senior secured loan   11.23%   5.75%   -    SOFR(Q)   6/30/2026    4,917    4,858    4,941   2.0%
      First lien senior secured loan   11.23%   5.75%   -    SOFR(M)   6/30/2026    87    85    87   0.0%
Improving Acquisition LLC     First lien senior secured loan   11.00%   6.50%   -    SOFR(S)   7/26/2027    4,554    4,494    4,531   1.8%
      First lien senior secured revolving loan   11.00%   6.50%   -    SOFR(S)   7/26/2027    -    -    -   0.0%
                                  9,558    9,437    9,559   3.8%

 

See accompanying notes to consolidated financial statements.

 

7

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of September 30, 2024

(amounts in 000’s, except number of shares, units)

(Unaudited)

 

Portfolio Company(1)  Footnotes  Investment  Interest Rate   Spread   PIK Rate     Reference(2)  Maturity
Date
   Principal
/Par
  

Amortized

Cost(3)(4)

  Fair
Value
   Percentage
of Net Assets
Leisure products                                      
BCI Burke Holding Corp.     First lien senior secured loan   10.37%   5.50%   -     SOFR(Q)   12/14/2027    1,666    1,653   1,666   0.7%
      First lien senior secured delayed draw loan   10.37%   5.50%   -     SOFR(Q)   10/26/2024    60    57   60   0.0%
      First lien senior secured revolving loan   10.37%   5.50%   -     SOFR(Q)   6/14/2027    -    -   -   0.0%
MacNeill Pride Group Corp.     First lien senior secured delayed draw loan   11.87%   6.50%   0.50%   SOFR(Q)   4/22/2026    957    944   947   0.4%
      First lien senior secured revolving loan   11.87%   7.00%   -     SOFR(Q)   4/22/2026    87    84   86   0.0%
Pixel Intermediate, LLC  (5)  First lien senior secured loan   11.56%   6.25%   -     SOFR(S)   2/1/2029    4,066    3,974   4,066   1.7%
      First lien senior secured revolving loan   11.58%   6.25%   -     SOFR(S)   2/1/2029    1,024    997   1,024   0.4%
Spinrite, Inc.  (5)  First lien senior secured loan   10.84%   5.50%   -     SOFR(Q)   6/30/2025    837    837   837   0.3%
      First lien senior secured revolving loan   10.10%   5.50%   -     SOFR(Q)   6/30/2025    416    408   416   0.2%
VENUplus, Inc. (f/k/a CTM Group, Inc.)     First lien senior secured loan   12.21%   6.75%   0.25%   SOFR(Q)   11/30/2026    3,002    2,945   2,972   1.2%
                                   12,115    11,899   12,074   4.9%
Machinery                                             
Luxium Solutions, LLC     First lien senior secured loan   11.10%   6.25%   -     SOFR(M)   12/1/2027    2,146    2,117   2,157   0.9%
      First lien senior secured delayed draw loan   10.85%   6.25%   -     SOFR(Q)   12/1/2027    311    307   313   0.1%
PVI Holdings, Inc     First lien senior secured loan   11.77%   6.39%   -     SOFR(Q)   1/18/2028    2,033    2,011   2,033   0.8%
                                   4,490    4,435   4,503   1.8%
                                              
Personal care products                                                
Phoenix YW Buyer, Inc. (Elida Beauty)     First lien senior secured loan   9.85%   5.00%   -     SOFR(M)   5/31/2030    2,709    2,642   2,750   1.1%
      First lien senior secured revolving loan   9.85%   5.00%   -   SOFR(M)   5/31/2030    -    -   -   0.0%
Silk Holdings III Corp. (Suave)     First lien senior secured loan   10.76%   5.50%   -     SOFR(M)   5/1/2029    5,384    5,294   5,410   2.2%
                                   8,093    7,936   8,160   3.3%
Professional services                                                
DISA Holdings Corp. (DISA)     First lien senior secured delayed draw loan   10.02%   5.00%   -     SOFR(Q)   9/9/2028    1,298    1,267   1,298   0.5%
      First lien senior secured revolving loan   10.02%   5.00%   -     SOFR(Q)   9/9/2028    -    -   -   0.0%
      First lien senior secured loan   10.02%   5.00%   -     SOFR(Q)   9/9/2028    223    220   223   0.1%
      First lien senior secured loan   10.02%   5.00%   -     SOFR(Q)   9/9/2028    3,369    3,298   3,369   1.4%
Envirotech Services, LLC     First lien senior secured loan   10.96%   6.00%   -     SOFR(M)   1/18/2029    5,798    5,658   5,798   2.4%
      First lien senior secured revolving loan   10.96%   6.00%   -     SOFR(M)   1/18/2029    -    -   -   0.0%
                                   10,688    10,443   10,688   4.4%
Software                                                
AIDC Intermediate Co 2, LLC (Peak Technologies)     First lien senior secured loan   10.53%   5.25%   -     SOFR(Q)   7/22/2027    2,945    2,871   2,945   1.2%
                                                 
Textiles, apparel & luxury goods                                                
American Soccer Company, Incorporated (SCORE)     First lien senior secured loan   15.00%   7.25%   3.00%   SOFR(Q)   7/20/2027    2,371    2,284   2,371   1.0%
      First lien senior secured revolving loan   15.53%   7.25%   3.00   SOFR(Q)   7/20/2027    93    78   93   0.0%
                                   2,464    2,362   2,464   1.0%

 

See accompanying notes to consolidated financial statements.

 

8

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of September 30, 2024

(amounts in 000’s, except number of shares, units)

(Unaudited)

 

Portfolio Company(1)  Footnotes  Investment  Interest Rate   Spread   PIK Rate   Reference(2)  Maturity
Date
  Principal
/Par
  

Amortized

Cost(3)(4)

   Fair
Value
   Percentage
of Net Assets
 
Trading companies & distributors                                        
TL Alpine Holding Corp. (Air Distribution Technologies Inc.)    First lien senior secured loan   11.25%   6.00%   -   SOFR(Q)  8/1/2030   3,959    3,881    3,959    1.6%
BCDI Meteor Acquisition, LLC (Meteor)     First lien senior secured loan   11.70%   7.00%   -   SOFR(Q)  6/29/2028   5,298    5,199    5,298    2.1%
CGI Automated Manufacturing, LLC     First lien senior secured loan   11.87%   7.00%   -   SOFR(Q)  12/17/2026   1,450    1,423    1,450    0.6%
      First lien senior secured delayed draw loan   11.87%   7.00%   -   SOFR(Q)  12/17/2026   1,211    1,189    1,211    0.5%
      First lien senior secured revolving loan   11.87%   7.00%   -   SOFR(Q)  12/17/2026   160    157    160    0.1%
Dusk Acquisition II Corporation (Motors & Armatures, Inc. – MARS)     First lien senior secured loan   10.60%   6.00%   -   SOFR(Q)  7/12/2029   5,314    5,214    5,367    2.2%
EIS Legacy, LLC     First lien senior secured loan   11.20%   6.00%   -   SOFR(Q)  11/1/2027   142    139    142    0.1%
      First lien senior secured loan   11.38%   6.00%   -   SOFR(Q)  11/1/2027   5,173    5,100    5,173    2.1%
      First lien senior secured delayed draw loan   11.35%   6.00%   -   SOFR(Q)  11/1/2027   1,654    1,631    1,654    0.7%
Energy Acquisition LP (Electrical Components International, Inc. - ECI)     First lien senior secured loan   11.28%   6.50%   -   SOFR(S)  5/10/2029   5,118    5,019    5,182    2.1%
      First lien senior secured delayed draw loan   11.28%   6.50%   -   SOFR(S)  5/11/2026   -    -    -    0.0%
Engineered Fastener Company, LLC (EFC International)     First lien senior secured loan   11.25%   6.50%   -   SOFR(Q)  11/1/2027   6,895    6,775    6,926    2.8%
Genuine Cable Group, LLC     First lien senior secured loan   10.70%   5.75%   -   SOFR(M)  11/1/2026   4,900    4,808    4,900    2.0%
      First lien senior secured loan   10.70%   5.75%   -   SOFR(M)  11/1/2026   1,975    1,939    1,975    0.8%
I.D. Images Acquisition, LLC     First lien senior secured loan   10.60%   5.75%   -   SOFR(M)  7/30/2027   2,918    2,884    2,918    1.2%
      First lien senior secured loan   10.60%   5.75%   -   SOFR(M)  7/30/2027   659    637    659    0.2%
Krayden Holdings, Inc.     First lien senior secured delayed draw loan   9.60%   4.75%   -   SOFR(M)  3/1/2025   -    -    -    0.0%
      First lien senior secured delayed draw loan   9.60%   4.75%   -   SOFR(M)  3/1/2025   -    -    -    0.0%
      First lien senior secured revolving loan   9.60%   4.75%   -   SOFR(M)  3/1/2029   -    -    -    0.0%
      First lien senior secured loan   9.60%   4.75%   -   SOFR(M)  3/1/2029   3,140    3,031    3,140    1.3%
OAO Acquisitions, Inc. (BearCom)     First lien senior secured loan   11.42%   6.25%   -   SOFR(M)  12/27/2029   4,414    4,354    4,502    1.8%
      First lien senior secured delayed draw loan   11.42%   6.25%   -   SOFR(M)  12/27/2025   168    157    172    0.1%
      First lien senior secured revolving loan   11.42%   6.25%   -   SOFR(M)  12/27/2029   -    -    -    0.0%
                               54,548    53,537    54,788    22.3%
Wireless telecommunication services                                               
Centerline Communications, LLC     First lien senior secured loan   13.17%   8.00%   -   SOFR(Q)  8/10/2027   100    98    100    0.0%
      First lien senior secured delayed draw loan   12.27%   6.00%   1.00%  SOFR(Q)  8/10/2027   2,964    2,927    2,727    1.1%
      First lien senior secured loan   12.27%   6.00%   1.00%  SOFR(Q)  8/10/2027   664    649    610    0.2%
                               3,728    3,674    3,437    1.3%
Total Debt Investments                              248,013    243,372    247,764    100.5%

 

 

See accompanying notes to consolidated financial statements.

 

9

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of September 30, 2024

(amounts in 000’s, except number of shares, units)

(Unaudited)

 

      Number of       Fair   Percentage 
   Footnotes  Shares   Cost   Value   of Net Assets 
Short-Term Investments                   
Morgan Stanley Institutional Liquidity Fund, Institutional Class, 4.77%  (6)   2,076    2,076    2,076    0.8%
Total Short-Term Investments      2,076    2,076    2,076    0.8%
                        
Total Investments          $245,448   $249,840    101.3%
                        
Liabilities in Excess of Other Assets                (3,471)   (1.3)%
Net Assets               $246,369    100.0%

  

(1) As of September 30, 2024, all investments are Level 3 holdings. See Note 5- Fair Value. As of such date, all investments are also non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company. 

(2) Unless otherwise noted, all loans contain a variable rate structure, that may be subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the Secured Overnight Financing Rate (“SOFR”) (which can include one-(M), three-(Q) or six-month (S) SOFR), or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate).
(3) The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method. 

(4) As of September 30, 2024, the tax cost of the Company’s investments approximates their amortized cost.

(5) Non-qualifying investment as defined by Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of September 30, 2024, 4.5% of the Company’s total assets were in non-qualifying investments. 

(6) The indicated rate is the yield as of September 30, 2024.

 

See accompanying notes to consolidated financial statements.

 

10

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of December 31, 2023

(amounts in 000’s, except number of shares, units)

 

                Maturity     Principal/     Amortized     Fair     Percentage  
Portfolio Company(1)    Footnotes    Investment    Interest Rate    Date      Par      Cost(2)(3)      Value      of Net Assets  
Debt Investments                                                    
Private Credit Investments(4)                                                    
Aerospace & defense                                                    
Basel U.S. Acquisition Co., Inc. (IAC)   (5)   First lien senior secured revolving loan   11.51% (S + 6.00%)     12/5/2028     $             -     $ -     $ -           0.0 %
        First lien senior secured loan   11.51% (S + 6.00%)     12/5/2028       4,555       4,449       4,600       2.5 %
Precinmac (US) Holdings, Inc.       First lien senior secured loan   11.46% (S + 6.00%)     8/31/2027       281       276       277       0.2 %
Vitesse Systems Parent, LLC       First lien senior secured loan   12.63% (S + 7.00%)     12/22/2028       5,957       5,808       5,957       3.2 %
                          10,793       10,533       10,834       5.9 %
Automobile components                                                    
Speedstar Holding LLC       First lien senior secured delayed draw loan   12.78% (S + 7.25%)     1/22/2027       186       181       184       0.1 %
        First lien senior secured loan   12.78% (S + 7.25%)     1/22/2027       790       771       786       0.4 %
Vehicle Accessories, Inc.       First lien senior secured loan   10.72% (S + 5.25%)     11/30/2026       1,697       1,678       1,697       0.9 %
                          2,673       2,630       2,667       1.4 %
Biotechnology                                                    
Alcami Corporation (Alcami)       First lien senior secured delayed draw loan   12.46% (S + 7.00%)     6/30/2024       -       -       -       0.0 %
        First lien senior secured revolving loan   12.46% (S + 7.00%)     12/21/2028       -       -       -       0.0 %
        First lien senior secured loan   12.46% (S + 7.00%)     12/21/2028       4,068       3,919       4,150       2.2 %
                          4,068       3,919       4,150       2.2 %
Building Products                                                    
Ruff Roofers Buyer, LLC       First lien senior secured loan   11.08% (S + 5.75%)     11/19/2029       1,619       1,557       1,619       0.9 %
        First lien senior secured revolving loan   11.08% (S + 5.75%)     11/19/2029       -       -       -       0.0 %
        First lien senior secured delayed draw loan   11.08% (S + 5.75%)     11/17/2024       -       -       -       0.0 %
        First lien senior secured delayed draw loan   11.08% (S + 5.75%)     11/17/2025       -       -       -       0.0 %
                          1,619       1,557       1,619       0.9 %

 

See accompanying notes to consolidated financial statements.

 

11

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of December 31, 2023

(amounts in 000’s, except number of shares, units)

 

                Maturity     Principal/     Amortized     Fair     Percentage  
Portfolio Company(1)    Footnotes    Investment    Interest Rate    Date      Par      Cost(2)(3)      Value      of Net Assets  
Capital Markets                                                    
Atria Wealth Solutions, Inc.       First lien senior secured delayed draw loan   11.97% (S + 6.50%)     5/31/2024       2,990       2,981       2,990       1.6 %
                                                     
Chemicals                                                    
Shrieve Chemical Company, LLC       First lien senior secured loan   11.82% (S + 6.38%)     12/2/2024       3,623       3,600       3,623       2.0 %
        First lien senior secured loan   11.82% (S + 6.38%)     12/2/2024       602       592       602       0.3 %
                          4,225       4,192       4,225       2.3 %
                                                     
Commercial services & supplies                                                    
Allentown, LLC       First lien senior secured loan   11.46% (S + 6.00%)     4/22/2027       2,254       2,238       2,254       1.2 %
        First lien senior secured delayed draw loan   11.46% (S + 6.00%)     4/22/2027       407       402       407       0.3 %
        First lien senior secured revolving loan   13.50% (P + 5.00%)     4/22/2027       70       69       70       0.0 %
American Equipment Holdings LLC       First lien senior secured delayed draw loan   11.74% (S + 6.00%)     11/5/2026       4,970       4,894       4,945       2.7 %
BLP Buyer, Inc. (Bishop Lifting Products)       First lien senior secured loan   11.11% (S + 5.75%)     12/22/2029       4,933       4,835       4,933       2.7 %
        First lien senior secured delayed draw loan   11.11% (S + 5.75%)     12/22/2025       -       -       -       0.0 %
        First lien senior secured revolving loan   11.11% (S + 5.75%)     12/22/2029       52       31       52       0.0 %
                          12,686       12,469       12,661       6.9 %
Containers & packaging                                                    
Carton Packaging Buyer, Inc. (Century Box)       First lien senior secured loan   11.39% (S + 6.00%)     10/30/2028       5,445       5,292       5,444       3.0 %
        First lien senior secured delayed draw loan   11.39% (S + 6.00%)     10/30/2028       -       -       -       0.0 %
Drew Foam Companies, Inc.       First lien senior secured loan   12.80% (S + 7.25%)     11/5/2025       2,861       2,834       2,840       1.5 %
FCA, LLC (FCA Packaging)       First lien senior secured loan   11.90% (S + 6.50%)     7/18/2028       2,012       1,985       2,053       1.1 %
        First lien senior secured revolving loan   11.90% (S + 6.50%)     7/18/2028       -       -       -       0.0 %
Innopak Industries, Inc.       First lien senior secured loan   11.70% (S + 6.25%)     3/5/2027       5,627       5,505       5,627       3.0 %
                          15,945       15,616       15,964       8.6 %
Diversified telecommunication services                                                    
Network Connex (f/k/a NTI Connect, LLC)       First lien senior secured loan   10.95% (S + 5.50%)     1/31/2026       3,750       3,677       3,750       2.0 %

 

See accompanying notes to consolidated financial statements.

 

12

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of December 31, 2023

(amounts in 000’s, except number of shares, units)

 

                Maturity     Principal/     Amortized       Fair       Percentage    
Portfolio Company(1)    Footnotes    Investment    Interest Rate    Date      Par      Cost(2)(3)        Value        of Net Assets  
Food products                                                    
BR PJK Produce, LLC (Keany)       First lien senior secured loan   11.50% (S + 6.00%)     11/14/2027       4,724       4,631       4,724                2.6 %
        First lien senior secured delayed draw loan   11.46% (S + 6.00%)     11/14/2027       482       461       482       0.3 %
Gulf Pacific Holdings, LLC       First lien senior secured loan   11.25% (S + 5.75%)     9/30/2028       1,730       1,702       1,721       0.9 %
        First lien senior secured delayed draw loan   11.38% (S + 5.75%)     9/30/2028       146       139       145       0.1 %
        First lien senior secured revolving loan   11.28% (S + 5.75%)     9/30/2028       231       222       230       0.1 %
City Line Distributors, LLC       First lien senior secured loan   11.47% (S + 6.00%)     8/31/2028       1,874       1,807       1,874       1.0 %
        First lien senior secured delayed draw loan   11.47% (S + 6.00%)     3/3/2025       -       -       -       0.0 %
        First lien senior secured revolving loan   11.47% (S + 6.00%)     8/31/2028       -       -       -       0.0 %
IF&P Foods, LLC (FreshEdge)       First lien senior secured loan   11.07% (S + 5.63%)     10/3/2028       3,892       3,811       3,843       2.1 %
        First lien senior secured loan   11.48% (S + 6.00%)     10/3/2028       98       96       97       0.1 %
        First lien senior secured delayed draw loan   11.07% (S + 5.63%)     10/3/2028       578       567       571       0.3 %
        First lien senior secured revolving loan   10.91% (S + 5.63%)     10/3/2028       251       244       248       0.1 %
J&K Ingredients, LLC       First lien senior secured loan   11.63% (S + 6.25%)     11/16/2028       2,926       2,854       2,926       1.6 %
Siegel Egg Co., LLC       First lien senior secured loan   11.99% (S + 6.50%)     12/29/2026       2,459       2,430       2,323       1.3 %
        First lien senior secured revolving loan   11.99% (S + 6.50%)     12/29/2026       412       408       390       0.2 %
Worldwide Produce Acquisition, LLC       First lien senior secured delayed draw loan   11.60% (S + 6.25%)     1/18/2029       631       588       625       0.3 %
        First lien senior secured delayed draw loan   11.60% (S + 6.25%)     4/18/2024       -       -       -       0.0 %
        First lien senior secured revolving loan   11.60% (S + 6.25%)     1/18/2029       198       187       196       0.1 %
        First lien senior secured loan   11.60% (S + 6.25%)     1/18/2029       2,860       2,785       2,831       1.5 %
                          23,492       22,932       23,226       12.6 %

 

See accompanying notes to consolidated financial statements.

 

13

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of December 31, 2023

(amounts in 000’s, except number of shares, units)

 

                Maturity     Principal/     Amortized       Fair       Percentage    
Portfolio Company(1)    Footnotes    Investment     Interest Rate     Date      Par      Cost(2)(3)        Value        of Net Assets  
Health care providers & services                                                    
Brightview, LLC       First lien senior secured loan   11.47% (S + 6.00%)     12/14/2026       2,167       2,165       2,130       1.2 %
        First lien senior secured delayed draw loan   11.47% (S + 6.00%)     12/14/2026       289       289       284       0.2 %
        First lien senior secured revolving loan   11.47% (S + 6.00%)     12/14/2026       130       130       128       0.1 %
Guardian Dentistry Partners       First lien senior secured loan   11.97% (S + 6.50%)     8/20/2026       1,002       988       1,002       0.5 %
        First lien senior secured delayed draw loan   11.97% (S + 6.50%)     8/20/2026       1,951       1,930       1,951       1.1 %
Guided Practice Solutions: Dental, LLC (GPS)       First lien senior secured delayed draw loan   11.72% (S + 6.25%)     12/29/2025       1,484       1,388       1,484       0.8 %
Light Wave Dental Management LLC       First lien senior secured revolving loan   12.35% (S + 7.00%)     6/30/2029       598       573       598       0.3 %
        First lien senior secured loan   12.35% (S + 7.00%)     6/30/2029       6,145       5,983       6,145       3.3 %
SGA Dental Partners Holdings, LLC       First lien senior secured loan   11.67% (S + 6.00%)     12/30/2026       1,419       1,402       1,419       0.8 %
        First lien senior secured loan   11.61% (S + 6.00%)     12/30/2026       457       447       457       0.2 %
        First lien senior secured delayed draw loan   11.67% (S + 6.00%)     12/30/2026       1,323       1,282       1,323       0.7 %
        First lien senior secured delayed draw loan   11.67% (S + 6.00%)     4/19/2024       -       -       -       0.0 %
        First lien senior secured revolving loan   11.67% (S + 6.00%)     12/30/2026       -       -       -       0.0 %
                          16,965       16,577       16,921       9.2 %
Health care equipment & supplies                                                    
LSL Industries, LLC (LSL Healthcare)       First lien senior secured loan   12.15% (S + 6.50%)     11/3/2027       1,674       1,621       1,657       0.9 %
        First lien senior secured delayed draw loan   12.15% (S + 6.50%)     11/3/2024       -       -       -       0.0 %
        First lien senior secured revolving loan   12.15% (S + 6.50%)     11/3/2027       -       -       -       0.0 %
                          1,674       1,621       1,657       0.9 %
Insurance                                                    
Allcat Claims Service, LLC       First lien senior secured loan   11.53% (S + 6.00%)     7/7/2027       661       647       661       0.4 %
        First lien senior secured delayed draw loan   11.53% (S + 6.00%)     7/7/2027       1,852       1,824       1,852       1.0 %
        First lien senior secured revolving loan   11.53% (S + 6.00%)     7/7/2027       -       -       -       0.0 %
                          2,513       2,471       2,513       1.4 %
IT services                                                    
Domain Information Services Inc. (Integris)       First lien senior secured loan   11.29% (S + 5.75%)     9/30/2025       4,954       4,878       4,930       2.7 %
Improving Acquisition LLC       First lien senior secured loan   12.22% (S + 6.50%)     7/26/2027       4,589       4,512       4,566       2.5 %
        First lien senior secured revolving loan   12.22% (S + 6.50%)     7/26/2027       -       -       -       0.0 %
                          9,543       9,390       9,496       5.2 %

 

See accompanying notes to consolidated financial statements.

 

14

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of December 31, 2023

(amounts in 000’s, except number of shares, units)

 

                Maturity     Principal/     Amortized     Fair     Percentage  
Portfolio Company(1)    Footnotes    Investment    Interest Rate    Date      Par      Cost(2)(3)      Value      of Net Assets  
Leisure products                                                    
BCI Burke Holding Corp.       First lien senior secured loan   11.11% (S + 5.50%)     12/14/2027       2,038       2,015       2,069       1.1 %
        First lien senior secured delayed draw loan   11.11% (S + 5.50%)     12/14/2027       77       74       78       0.1 %
        First lien senior secured revolving loan   11.11% (S + 5.50%)     6/14/2027       -       -       -       0.0 %
VENUplus, Inc. (f/k/a CTM Group, Inc.)       First lien senior secured loan   12.29% (S + 6.75%)     11/30/2026       3,023       2,958       3,008       1.6 %
MacNeill Pride Group       First lien senior secured delayed draw loan   11.86% (S + 6.25%)     4/22/2026       981       962       969       0.5 %
        First lien senior secured revolving loan   11.86% (S + 6.25%)     4/22/2026       -       -       -       0.0 %
                          6,119       6,009       6,124       3.3 %
Machinery                                                    
Pennsylvania Machine Works, LLC       First lien senior secured loan   11.61% (S + 6.00%)     3/6/2027       919       913       919       0.5 %
PVI Holdings, Inc       First lien senior secured loan   12.16% (S + 6.77%)     1/18/2028       2,048       2,023       2,064       1.1 %
                          2,967       2,936       2,983       1.6 %
Professional services                                                    
DISA Holdings Corp. (DISA)       First lien senior secured delayed draw loan   10.84% (S + 5.50%)     9/9/2028       569       545       569       0.3 %
        First lien senior secured revolving loan   10.86% (S + 5.50%)     9/9/2028       60       53       60       0.1 %
        First lien senior secured loan   10.84% (S + 5.50%)     9/9/2028       3,394       3,311       3,394       1.8 %
Universal Marine Medical Supply International, LLC (Unimed)       First lien senior secured loan   13.01% (S + 7.50%)     12/5/2027       3,909       3,830       3,909       2.1 %
        First lien senior secured revolving loan   13.00% (S + 7.50%)     12/5/2027       735       721       735       0.4 %
                          8,667       8,460       8,667       4.7 %
Software                                                    
AIDC Intermediate Co 2, LLC (Peak Technologies)       First lien senior secured loan   11.80% (S + 6.25%)     7/22/2027       2,967       2,873       2,967       1.6 %
Textiles, apparel & luxury goods                                                    
American Soccer Company, Incorporated (SCORE)       First lien senior secured loan   12.75% (S + 7.25%)     7/20/2027       2,556       2,513       2,498       1.4 %
        First lien senior secured revolving loan   12.75% (S + 7.25%)     7/20/2027       182       177       178       0.1 %
                          2,738       2,690       2,676       1.5 %

 

See accompanying notes to consolidated financial statements.

 

15

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of December 31, 2023

(amounts in 000’s, except number of shares, units)

 

                Maturity     Principal/     Amortized     Fair     Percentage  
Portfolio Company(1)    Footnotes    Investment    Interest Rate    Date      Par      Cost(2)(3)      Value      of Net Assets  
Trading companies & distributors                                                    
BCDI Meteor Acquisition, LLC (Meteor)       First lien senior secured loan   12.45% (S + 7.00%)     6/29/2028       4,963       4,857       4,963                2.7 %
CGI Automated Manufacturing, LLC       First lien senior secured loan   12.61% (S + 7.00%)     12/17/2026       1,479       1,443       1,475       0.8 %
        First lien senior secured delayed draw loan   12.61% (S + 7.00%)     12/17/2026       1,235       1,206       1,232       0.7 %
        First lien senior secured revolving loan   12.61% (S + 7.00%)     12/17/2026       19       16       19       0.0 %
EIS Legacy, LLC       First lien senior secured loan   11.27% (S + 5.75%)     11/1/2027       5,212       5,097       5,212       2.8 %
        First lien senior secured delayed draw loan   11.27% (S + 5.75%)     4/20/2025       -       -       -       0.0 %
Engineered Fastener Company, LLC (EFC International)       First lien senior secured loan   12.00% (S + 6.50%)     11/1/2027       6,948       6,803       7,034       3.8 %
Genuine Cable Group, LLC       First lien senior secured loan   10.96% (S + 5.50%)     11/1/2026       4,938       4,817       4,925       2.7 %
        First lien senior secured loan   10.96% (S + 5.50%)     11/1/2026       1,991       1,941       1,985       1.1 %
I.D. Images Acquisition, LLC       First lien senior secured loan   11.75% (S + 6.25%)     7/30/2026       664       657       664       0.3 %
        First lien senior secured loan   11.71% (S + 6.25%)     7/30/2026       2,942       2,901       2,942       1.6 %
Krayden Holdings, Inc.       First lien senior secured delayed draw loan   11.20% (S + 5.75%)     3/1/2025       -       -       -       0.0 %
        First lien senior secured delayed draw loan   11.20% (S + 5.75%)     3/1/2025       -       -       -       0.0 %
        First lien senior secured revolving loan   11.20% (S + 5.75%)     3/1/2029       -       -       -       0.0 %
        First lien senior secured loan   11.20% (S + 5.75%)     3/1/2029       3,164       3,032       3,164       1.7 %
OAO Acquisitions, Inc. (BearCom)       First lien senior secured loan   11.61% (S + 6.25%)     12/27/2029       4,436       4,355       4,436       2.4 %
        First lien senior secured delayed draw loan   11.61% (S + 6.25%)     12/27/2025       -       -       -       0.0 %
        First lien senior secured revolving loan   11.61% (S + 6.25%)     12/27/2029       -       -       -       0.0 %
                          37,991       37,125       38,051       20.6 %
Wireless telecommunication services                                                    
Centerline Communications, LLC       First lien senior secured delayed draw loan   11.52% (S + 6.00%)     8/10/2027       2,967       2,929       2,766       1.5 %
        First lien senior secured loan   11.52% (S + 6.00%)     8/10/2027       664       648       619       0.3 %
                          3,631       3,577       3,385       1.8 %
Total Investments                         178,016       174,235       177,526       96.2 %

 

See accompanying notes to consolidated financial statements.

 

16

 

Kayne DL 2021, Inc.

Consolidated Schedule of Investments

As of December 31, 2023

(amounts in 000’s, except number of shares, units)

 

      Number of       Fair   Percentage 
   Footnotes  Shares   Cost   Value   of Net Assets 
Short-Term Investments                       
First American Treasury Obligations Fund – Institutional Class Z, 5.21%  (6)   4,715,161    4,715    4,715    2.6%
Total Short-Term Investments      4,715,161    4,715    4,715    2.6%
Total Investments          $178,950   $182,241    98.8%
                        
Assets in Excess of Other Liabilities                2,310    1.2%
Net Assets               $184,551    100.0%

 

(1) As of December 31, 2023, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company. 
(2) The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method. 
(3) As of December 31, 2023, the tax cost of the Company’s investments approximates their amortized cost.
(4) Loan contains a variable rate structure, that may be subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the Secured Overnight Funding Rate (“SOFR” or “S”) (which can include one-, three- or six-month SOFR), or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate or “P”). 
(5) Non-qualifying investment as defined by Section 55(a) of the Investment Company Act of 1940.  The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2023, 2.4% of the Company’s total assets were in non-qualifying investments. 
(6) The indicated rate is the yield as of December 31, 2023.

 

See accompanying notes to consolidated financial statements.

 

17

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Note 1. Organization

 

Organization

 

Kayne DL 2021, Inc. (the “Company”) is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes, the Company intends to qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

 

The Company was formed as a Delaware corporation to make investments in middle-market companies and commenced operations on December 16, 2021.

 

The Company is managed by KA Credit Advisors II, LLC (the “Advisor”), an indirect controlled subsidiary of Kayne Anderson Capital Advisors, L.P. (“Kayne Anderson”), a prominent alternative investment management firm. The Advisor is registered with the United States Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended. Subject to the overall supervision of the Company’s board of directors (the “Board”), the Advisor is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring investments, determining the value of the investments and monitoring its investments and portfolio companies on an ongoing basis. The Board consists of five directors, four of whom are independent (including the Board’s chairperson).

 

The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market companies.

 

As of September 30, 2024, the Company has entered into subscription agreements with investors for an aggregate capital commitment of $353,535 to purchase shares of the Company’s common stock ($135,535 is undrawn). See Note 11 – Subsequent Events.

 

The Company conducts private offerings of its Common Stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). At the closing of any private offering, each investor will make a capital commitment (a “Capital Commitment”) to purchase shares of its common stock pursuant to a subscription agreement entered into with the Company. Investors will be required to fund drawdowns to purchase shares up to the amount of their respective Capital Commitments each time the Company delivers a notice to the investors. The Company commenced its loan origination and investment activities on December 16, 2021 contemporaneously with the initial drawdown from investors in the private offering.

 

18

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Note 2. Significant Accounting Policies

 

A. Basis of Presentation—the accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company is an investment company and follows accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 — “Financial Services — Investment Companies.” In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair statement of the financial statements for the periods presented, have been included.

 

B. Consolidation—As provided under Regulation S-X and ASC Topic 946 – “Financial Services – Investment Companies”, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or controlled operating company whose business consists of providing services to the Company.

 

Accordingly, the Company consolidated the accounts of KDL Corp, LLC in its consolidated financial statements. KDL Corp, LLC is a Delaware LLC that has elected to be treated as a corporation for U.S. tax purposes and was formed to facilitate compliance with the requirements to be treated as a RIC under the Code by holding (directly or indirectly through a subsidiary) equity or equity related investments in portfolio companies organized as limited liability companies or limited partnerships. As of September 30, 2024, KDL Corp, LLC held no investments.

 

C. Use of Estimates—the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the period. Actual results could differ materially from those estimates.

  

D. Cash and Cash Equivalents—cash and cash equivalents include short-term, liquid investments with an original maturity of three months or less and include money market fund accounts. Cash equivalents, which are the Company’s investments in money market fund accounts, are presented on the Company’s consolidated schedule of investments, and within investments on the Company’s consolidated statement of assets and liabilities.

 

E. Investment Valuation, Fair Value—the Company conducts the valuation of its investments consistent with GAAP and the 1940 Act. The Company’s investments will be valued no less frequently than quarterly, in accordance with the terms of Topic 820 of the Financial Accounting Standards Board’s Accounting Standards Codification, Fair Value Measurement and Disclosures (“ASC 820”).

 

Pursuant to Rule 2a-5 under the 1940 Act, the Board of Directors has designated the Advisor as the “valuation designee” to perform fair value determinations of the Company’s portfolio holdings, subject to oversight by and periodic reporting to the Board. The valuation designee performs fair valuation of the Company’s portfolio holdings in accordance with the Advisor’s Valuation Program, as approved by the Board.

 

19

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Traded Investments (Level 1 or Level 2)

 

Investments for which market quotations are readily available will typically be valued at those market quotations. Traded investments such as corporate bonds, preferred stock, bank notes, broadly syndicated loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker, the agent bank, syndicate bank or principal market maker. When price quotes for investments are not available, or such prices are stale or do not represent fair value in the judgment of the Company’s Advisor, fair market value will be determined using the Advisor’s valuation process for investments that are privately issued or otherwise restricted as to resale.

 

The Company may also invest, to a lesser extent, in equity securities purchased in conjunction with debt investments. While the Company anticipates these equity securities to be issued by privately held companies, the Company may hold equity securities that are publicly traded. Equity securities listed on any exchange other than the NASDAQ Stock Market, Inc. (“NASDAQ”) are valued, except as indicated below, at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities admitted to trade on the NASDAQ are valued at the NASDAQ official closing price. Equity securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Equity securities traded in the over-the-counter market, but excluding securities admitted to trading on the NASDAQ, are valued at the closing bid prices.

 

Non-Traded Investments (Level 3)

 

Investments that are privately issued or otherwise restricted as to resale, as well as any security for which (a) reliable market quotations are not available in the judgment of the Company’s Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in the judgment of the Company’s Advisor is stale or does not represent fair value, shall each be valued in a manner that most fairly reflects fair value of the security on the valuation date. The Company expects that a significant majority of its investments will be Level 3 investments. Unless otherwise determined by the Advisor, the following valuation process is used for the Company’s Level 3 investments:

  

Valuation Designee. The applicable investments will be valued no less frequently than quarterly by the Advisor, with new investments valued at the time such investment was made. The value of each Level 3 investment will be initially reviewed by the persons responsible for such portfolio company or investment. The Advisor will use a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs to determine a preliminary value. The Advisor will specify the titles of the persons responsible for determining the fair value of Company investments, including by specifying the particular functions for which they are responsible, and will reasonably segregate fair value determinations from the portfolio management of the Company such that the portfolio manager(s) may not determine, or effectively determine by exerting substantial influence on, the fair values ascribed to portfolio investments.

 

Valuation Firm. Quarterly, a third-party valuation firm engaged by the Advisor reviews the valuation methodologies and calculations employed for each of the Company’s investments that the Advisor has placed on the “watch list” and approximately 25% of the Company’s remaining investments. The third-party valuation firm will review and independently value all of the Level 3 investments at least once per year, on a rolling twelve-month basis. The quarterly report issued by the third-party valuation firm will provide positive assurance on the fair values of the investments reviewed.

 

Oversight. The Board has appointed the Advisor as the valuation designee for the Company for purposes of making determinations of fair value as permitted by Rule 2a-5 under the 1940 Act. The Audit Committee shall aid the Board in overseeing the Advisor’s fair valuation of securities that are not publicly traded or for which current market values are not readily available. The Audit Committee shall meet quarterly to review the fair value determinations, processes and written reports of the Advisor as part of the Board’s oversight responsibilities.

 

20

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to the Company’s financial statements will express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the Company’s financial statements.

 

F. Interest Income Recognition—Interest income is recorded on an accrual basis and includes the accretion of discounts, amortization of premiums and payment-in-kind (“PIK”) interest. Discounts from and premiums to par value on investments purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. To the extent loans contain PIK provisions, PIK interest, computed at the contractual rate specified in each applicable agreement, is accrued and recorded as interest income and added to the principal balance of the loan. PIK interest income added to the principal balance is generally collected upon repayment of the outstanding principal. The Company does not accrue PIK interest if, in the opinion of the Advisor, the portfolio company valuation indicates that the PIK interest is not likely to be collectible. If the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest is generally reversed through PIK interest income. Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends for the year the income was earned, even though the Company has not yet collected the cash. The amortized cost of investments represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest. For the nine months ended September 30, 2024, the Company had $83 of PIK interest included in interest income, which represents 0.4% of aggregate interest income. There was no PIK interest for the nine months ended September 30, 2023.

 

Loans are generally placed on non-accrual status when it has been determined that a significant impairment in the financial condition and ability of the borrower to repay principal and interest has occurred and is expected to continue such that it is probable the collectability of full amount of the loan (principal and interest) is doubtful. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. If cash payments are received subsequent to a loan being placed on non-accrual status, these payments will first be applied to previously accrued but uncollected interest, then to recover the principal. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Non-accrual loans are restored to accrual status when past due principal and interest are paid or there is no longer a reasonable doubt that such principal or interest will be collected in full and, in the Company’s judgment, principal and interest are likely to remain current. The Company may make exceptions to this policy if the loan has sufficient collateral value (i.e., typically measured as enterprise value of the portfolio company) or is in the process of collection. As of September 30, 2024 and December 31, 2023, the Company did not have any debt investments in portfolio companies on non-accrual status.

 

G. Debt Issuance Costs – Costs incurred by the Company related to the issuance of its debt (credit facilities) are capitalized and amortized over the period the debt is outstanding. The Company has classified the costs incurred to issue its credit facilities as a deduction from the carrying value of the credit facilities on the Statement of Assets and Liabilities. For the purpose of calculating the Company’s asset coverage ratios pursuant to the 1940 Act, deferred issuance costs are not deducted from the carrying value of debt or preferred stock.

 

H. Dividends to Common Stockholders—Dividends to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Company’s board of directors each quarter and is generally based upon the earnings estimated by management and considers the level of undistributed taxable income carried forward from the prior year for distribution in the current year. Net realized capital gains, if any, are generally distributed, although the Company may decide to retain such capital gains for investment.

 

I. Income Taxes – it is the Company’s intention to continue to be treated as and to qualify each year for special tax treatment afforded a RIC under the Code. As long as the Company meets certain requirements that govern its sources of income, diversification of assets and timely distribution of earnings to stockholders, the Company will not be subject to U.S. federal income tax.

 

21

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

The Company must pay distributions equal to 90% of its investment company taxable income (ordinary income and short-term capital gains) to qualify as a RIC and it must distribute all of its taxable income (ordinary income, short-term capital gains and long-term capital gains) to avoid federal income taxes. The Company will be subject to federal income tax on any undistributed portion of income. For purposes of the distribution test, the Company may elect to treat as paid on the last day of its taxable year all or part of any distributions that are declared after the end of its taxable year if such distributions are declared before the due date of its tax return, including any extensions.

  

All RICs are subject to a non-deductible 4% excise tax on income that is not distributed on a timely basis in accordance with the calendar year distribution requirements. To avoid the tax, the Company must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of its net capital gains for the one-year period ending on December 31, the last day of our taxable year, and (iii) undistributed amounts from previous years on which the Company paid no U.S. federal income tax. A distribution will be treated as paid during the calendar year if it is paid during the calendar year or declared by the Company in October, November or December of such year, payable to stockholders of record on a date during such months and paid by the Company no later than January of the following year. Any such distributions paid during January of the following year will be deemed to be received by stockholders on December 31 of the year the distributions are declared, rather than when the distributions are actually received.

  

The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

  

J. Commitments and Contingencies – in the normal course of business, the Company may enter into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.

 

Note 3. Agreements and Related Party Transactions

 

A. Administration Agreement – on December 16, 2021, the Company entered into an Administration Agreement with its Advisor, which serves as its Administrator and will provide or oversee the performance of its required administrative services and professional services rendered by others, which will include (but are not limited to), accounting, payment of our expenses, legal, compliance, operations, technology and investor relations, preparation and filing of its tax returns, and preparation of financial reports provided to its stockholders and filed with the SEC. On March 6, 2024, the Board approved an additional one-year term of the Administration Agreement through March 15, 2025.

 

The Company will reimburse the Administrator for its costs and expenses incurred in performing its obligations under the Administration Agreement. As the Company reimburses the Administrator for its expenses, the Company will indirectly bear such cost. The Administration Agreement may be terminated by either party with 60 days’ written notice.

 

22

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

B. Investment Advisory Agreement – on December 16, 2021, the Company entered into an Investment Advisory Agreement with its Advisor. Pursuant to the Investment Advisory Agreement with its Advisor, the Company will pay its Advisor a management fee for investment advisory and management services. The Investment Advisory Agreement may be terminated by either party with 60 days’ written notice. On March 6, 2024, the Board approved an additional one-year term of the Investment Advisory Agreement from March 16, 2024 to March 15, 2025.

 

Management Fee

 

The management fee will be calculated at an annual rate of 0.75% of the fair market value of the Company’s investments including, in each case, assets purchased with borrowings under credit facilities, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase.

 

The management fee will be payable quarterly in arrears and calculated based on the average of the Company’s fair market value of investments, at the end of the two most recently completed calendar quarters, including, in each case, assets purchased with borrowings under credit facilities, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase. Management fees for any partial quarter will be appropriately pro-rated. 

 

For the three months ended September 30, 2024 and 2023, the Company incurred management fees of $446 and $270, respectively.

 

For the nine months ended September 30, 2024 and 2023, the Company incurred management fees of $1,193 and $745, respectively

 

C. Other – Kayne Anderson, an affiliate of the Advisor, made equity contributions of $500 during the nine months ended September 30, 2024.

 

Note 4. Investments 

 

The following table presents the composition of the Company’s investment portfolio at amortized cost and fair value as of September 30, 2024 and December 31, 2023.

 

   September 30,
2024
   December 31,
2023
 
   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value 
First-lien senior secured debt investments  $243,372   $247,764   $174,235   $177,526 
Short-term investments   2,076    2,076    4,715    4,715 
Total Investments  $245,448   $249,840   $178,950   $182,241 

 

As of September 30, 2024 and December 31, 2023, $11,468 and $4,600, respectively, of the Company’s total assets were non-qualifying assets as defined by Section 55(a) of the 1940 Act.

 

The Company uses Global Industry Classification Standards (GICS), Level 3 – Industry, for classifying the industry groupings of its portfolio companies.

 

23

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

The industry composition of long-term investments based on fair value as of September 30, 2024 and December 31, 2023 was as follows: 

 

   September 30,
2024
   December 31,
2023
 
Trading companies & distributors   22.1%        21.4%
Food products   12.1%   13.1%
Health care providers & services   10.5%   9.5%
Commercial services & supplies   7.7%   7.1%
Containers & packaging   7.5%   9.0%
Aerospace & defense   4.9%   6.1%
Leisure products   4.9%   3.5%
Professional services   4.3%   4.9%
Automobile components   4.0%   1.5%
IT services   3.8%   5.4%
Personal care products   3.3%   -%
Building products   2.2%   0.9%
Machinery   1.8%   1.7%
Biotechnology   1.8%   2.3%
Chemicals   1.7%   2.4%
Wireless telecommunication services   1.4%   1.9%
Capital markets   1.2%   1.7%
Software   1.2%   1.7%
Diversified telecommunication services   1.0%   2.1%
Insurance   1.0%   1.4%
Textiles, apparel & luxury goods   1.0%   1.5%
Health care equipment & supplies   0.6%   0.9%
    100.0%   100.0

 

24

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Note 5. Fair Value

 

The Fair Value Measurement Topic of the FASB Accounting Standards Codification (ASC 820) defines fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants under current market conditions at the measurement date. As required by ASC 820, the Company has performed an analysis of all investments measured at fair value to determine the significance and character of all inputs to their fair value determination. Inputs are the assumptions, along with considerations of risk, that a market participant would use to value an asset or a liability. In general, observable inputs are based on market data that is readily available, regularly distributed and verifiable that the Company obtains from independent, third-party sources. Unobservable inputs are developed by the Company based on its own assumptions of how market participants would value an asset or a liability.

 

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories. 

 

  Level 1 Valuations based on quoted unadjusted prices for identical instruments in active markets traded on a national exchange to which the Company has access at the date of measurement.

 

  Level 2 Valuations based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.

 

  Level 3 Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best available information.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

The following tables present the fair value hierarchy of investments as of September 30, 2024 and December 31, 2023. Note that the valuation levels below are not necessarily an indication of the risk or liquidity associated with the underlying investment.

 

   Fair Value Hierarchy as of September 30, 2024 
Investments:  Level 1   Level 2   Level 3   Total 
First-lien senior secured debt investments  $-   $          -   $247,764   $247,764 
Short-term investments   2,076    -    -    2,076 
Total Investments  $2,076   $-   $247,764   $249,840 

 

   Fair Value Hierarchy as of December 31, 2023 
Investments:  Level 1   Level 2   Level 3   Total 
First-lien senior secured debt investments  $-   $         -   $177,526   $177,526 
Short-term investments   4,715    -    -    4,715 
Total Investments  $4,715   $-   $177,526   $182,241 

 

25

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

The following tables present changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the three and nine months ended September 30, 2024 and 2023, respectively.

 

For the three months ended September 30, 2024  First-lien
senior secured
debt investments
 
Fair value, beginning of period  $224,946 
Purchases of investments, including PIK, if any   29,522 
Proceeds from sales of investments and principal repayments   (7,445)
Net change in unrealized gain (loss)   340 
Net realized gain (loss)   - 
Net accretion of discount on investments   401 
Transfers into (out of) Level 3   - 
Fair value, end of period  $247,764 

 

For the three months ended September 30, 2023  First-lien
senior secured
debt investments
 
Fair value, beginning of period  $140,544 
Purchases of investments, including PIK, if any   7,594 
Proceeds from sales of investments and principal repayments   (2,811)
Net change in unrealized gain (loss)   120 
Net realized gain (loss)   - 
Net accretion of discount on investments   245 
Transfers into (out of) Level 3   - 
Fair value, end of period  $145,692 

 

For the nine months ended September 30, 2024  First-lien
senior secured
debt investments
 
Fair value, beginning of period  $177,526 
Purchases of investments, including PIK, if any   84,470 
Proceeds from sales of investments and principal repayments   (16,447)
Net change in unrealized gain (loss)   1,101 
Net realized gain (loss)   - 
Net accretion of discount on investments   1,114 
Transfers into (out of) Level 3   - 
Fair value, end of period  $247,764 

 

For the nine months ended September 30, 2023  First-lien
senior secured
debt investments
 
Fair value, beginning of period  $107,312 
Purchases of investments, including PIK, if any   44,326 
Proceeds from principal payments and sales of investments   (7,085)
Net change in unrealized gain (loss)   491 
Net realized gain (loss)   - 
Net accretion of discount on investments   648 
Transfers into (out of) Level 3   - 
Fair value, end of period  $145,692 

 

26

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

For the three and nine months ended September 30, 2024 and 2023, the Company did not recognize any transfers to or from Level 3. The increase in unrealized gain (loss) relates to investments that were held during the period. The Company includes these unrealized gains and losses on the Statement of Operations – Net Change in Unrealized Gains (Losses).

 

Valuation Techniques and Unobservable Inputs

 

Non-traded debt investments are typically valued using either a market yield analysis or an enterprise value analysis. For debt investments that are not considered to be credit impaired, the Advisor uses a market yield analysis to determine fair value. If the debt investment is considered to be credit impaired (which is determined by performing an enterprise value analysis), the Advisor will use the enterprise value analysis or a liquidation basis analysis to determine fair value.

 

To determine fair value using a market yield analysis, the Advisor discounts the contractual cash flows of each investment at an appropriate discount rate (the market yield). To determine the estimated market yield for its debt investments, the Advisor analyzes changes in the risk/reward (measured by yields and leverage) of middle market indices as compared to changes in risk/reward for the underlying investment and estimates the appropriate discount rate for such debt investment. In this context, the discount rate and fair market value of the investment is impacted by the structure and pricing of the security relative to current market yields for similar investments in similar businesses as well as the financial performance of such business. In performing this analysis, the Advisor considers data sources including, but not limited to: (i) industry publications, such as S&P Global’s High-End Middle Market Lending Review; Thomson Reuter’s Refinitiv Middle Market Monthly Stats; CapitalIQ; Pitchbook News; The Lead Left, and other data sources; (ii) comparable investments reviewed or completed by affiliates of the Advisor, and (iii) information obtained and provided by the Advisor’s independent valuation managers.

 

To determine if a debt investment is credit impaired, the Advisor estimates the enterprise value of the business and compares such estimate to the outstanding indebtedness of such business. The Advisor utilizes the following valuation methodologies to determine the estimated enterprise value of the company: (i) analysis of valuations of publicly traded companies in a similar line of business (“public company comparable analysis”), (ii) analysis of valuations of M&A transaction valuations for companies in a similar line of business (“precedent transaction analysis”), (iii) discounted cash flows (“DCF analysis”) and (iv) other valuation methodologies.

 

In determining the non-traded debt investment valuations, the following factors are considered, where relevant: the nature and realizable value of any collateral; the company’s ability to make interest payments, amortization payments (if any) and other fixed charges; call features, put features and other relevant terms of the debt security; the company’s historical and projected financial results; the markets in which the company does business; changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be valued; and other relevant factors. 

 

27

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Equity investments in private companies are typically valued using one of or a combination of the following valuation techniques: (i) public company comparable analysis, (ii) precedent transaction analysis and (iii) DCF analysis.

 

Under all of these valuation techniques, the Advisor estimates operating results of the companies in which it invests, including earnings before interest expense, income tax expense, depreciation and amortization (“EBITDA”) and free cash flow. These estimates utilize unobservable inputs such as historical operating results, which may be unaudited, and projected operating results, which will be based on operating assumptions for such company. Investment performance data utilized will be the most recently available as of the measurement date which in many cases may reflect up to a one quarter lag in information. These estimates will be sensitive to changes in assumptions specific to such company as well as general assumptions for the industry. Other unobservable inputs utilized in the valuation techniques outlined above include: discounts for lack of marketability, selection of publicly traded companies, selection of similar precedent transactions, selected ranges for valuation multiples and expected required rates of return (discount rates).

 

Quantitative Table for Valuation Techniques

 

The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of September 30, 2024 and December 31, 2023. The tables are not intended to be all-inclusive but instead capture the significant unobservable inputs relevant to the Advisor’s determination of fair value. The Company calculates weighted average, based on the value of the unobservable input of each investment relative to the fair value of the investment compared to the total fair value of all investments.

 

   As of September 30, 2024 
       Valuation  Unobservable      Weighted 
   Fair Value   Technique  Input  Range   Average 
First-lien senior secured debt investments  $247,764   Discounted cash flow analysis  Discount rate   7.5% - 15.0%    9.1%

 

   As of December 31, 2023 
       Valuation  Unobservable      Weighted 
   Fair Value   Technique  Input  Range   Average 
First-lien senior secured debt investments  $177,526   Discounted cash flow analysis  Discount rate   8.5% - 15.0%    9.8%

 

Note 6. Debt

 

As of September 30, 2024, the Company has a senior secured revolving credit facility (the “Subscription Credit Facility”), that has a total commitment of $25,000 and a maturity date of February 21, 2025. The Subscription Credit Facility permits the Company to borrow up to $25,000, subject to availability under the borrowing base which is calculated based on the unused capital commitments of the investors meeting various eligibility requirements. As of September 30, 2024, the interest rate on the Subscription Credit Facility is equal to SOFR plus an applicable spread of 2.25% with no floor. The Company is also required to pay a commitment fee of 0.25% per annum on any unused portion of the Subscription Credit Facility.

 

28

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Debt obligations consisted of the following as of September 30, 2024 and December 31, 2023.

 

   September 30, 2024 
   Aggregate
Principal
Committed
   Outstanding
Principal
   Amount
Available(1)
 
Subscription Credit Facility  $25,000   $            -   $25,000 
Total debt  $25,000   $-   $25,000 

 

(1) The amounts available do not reflect any limitations related to the Subscription Credit Facility’s borrowing base as of September 30, 2024.

 

    December 31, 2023  
    Aggregate
Principal
Committed
    Outstanding
Principal
    Amount
Available(1)
 
Subscription Credit Facility   $ 25,000     $               -     $ 25,000  
Total debt   $ 25,000     $ -     $ 25,000  

 

(1) The amounts available under the Company’s credit facility reflect any limitations related to the Subscription Credit Facility’s borrowing base as of September 30, 2024 and December 31, 2023, respectively.

 

For the nine months ended September 30, 2024 and 2023, the weighted average interest rate of borrowings outstanding was 7.52% and 6.7%, respectively. 

 

As of September 30, 2024 and 2023, the Company did not have any amounts outstanding under the Subscription Credit Facility. The Company does not routinely use leverage, and there are many days when there are no borrowings outstanding under its Subscription Credit Facility.

 

Note 7. Share Transactions

 

Common Stock Issuances

 

The following tables summarize the number of common stock shares issued and aggregate proceeds received from such issuances related to the Company’s capital call notices pursuant to subscription agreements with investors for the nine months ended September 30, 2024 and 2023, respectively.

 

For the nine months ended September 30, 2024
   Offering       Aggregate 
   price per   Common stock   offering 
Common stock issue date  share   shares issued   amount 
February 15, 2024  $5,308       4,710   $25,000 
July 3, 2024  $5,269    4,745   25,000 
Total common stock issued        9,455   $50,000 

 

 

For the nine months ended September 30, 2023
   Offering       Aggregate 
   price per   Common stock   offering 
Common stock issue date  share   shares issued   amount 
February 28, 2023  $5,236       4,775   $25,000 
August 10, 2023  $5,237    4,774   25,000 
Total common stock issued        9,549   $50,000 

 

As of September 30, 2024, the Company had subscription agreements with investors for an aggregate capital commitment of $353,535 to purchase shares of common stock. Of this amount, the Company had $135,535 of undrawn commitments at September 30, 2024. See Note 11 – Subsequent Events.

 

29

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Dividends and Dividend Reinvestment

 

The following tables summarize the dividends declared and payable by the Company for the nine months ended September 30, 2024 and 2023, respectively. See Note 11 – Subsequent Events.

 

For the nine months ended September 30, 2024
   Dividend  Dividend   
   record  payment  Dividend 
Dividend declaration date  date  date  per share 
March 6, 2024  March 29, 2024  April 17, 2024  $136.00 
May 8, 2024  June 28, 2024  July 15, 2024   137.00 
August 7, 2024  September 30, 2024  October 15, 2024   165.00 
Total dividends declared        $438.00 

 

For the nine months ended September 30, 2023
   Dividend  Dividend   
   record  payment  Dividend 
Dividend declaration date  date  date  per share 
March 7, 2023  March 31, 2023  April 14, 2023  $115.00 
May 10, 2023  June 30, 2023  July 14, 2023   136.00 
August 10, 2023  September 29, 2023  October 13, 2023   131.00 
Total dividends declared        $382.00 

 

The following tables summarize the amounts received and shares of common stock issued to shareholders pursuant to the Company’s dividend reinvestment plan (“DRIP”) for the nine months ended September 30, 2024 and 2023, respectively. See Note 11 – Subsequent Events.

 

For the nine months ended September 30, 2024
    Dividend   DRIP        
    payment   shares     DRIP  
Dividend record date   date   issued     value  
December 29, 2023   January 16, 2024     883     $ 4,616  
March 29, 2024   April 17, 2024     1,047       5,509  
June 28, 2024   July 15, 2024     162       854  
Total dividends declared         2,092     $ 10,979  

 

For the nine months ended  September 30, 2023
    Dividend   DRIP        
    payment   shares     DRIP  
Dividend record date   date   issued     value  
December 29, 2022   January 13, 2023     340     $ 1,750  
March 31, 2023   April 14, 2023     564       2,923  
June 30, 2023   July 14, 2023     681       3,533  
Total dividends declared         1,585     $ 8,206  

 

For the dividend with a record date of September 30, 2024 and paid on October 15, 2024, there were 218 shares issued with a DRIP value of $1,149. These shares are excluded from the table above, as the DRIP shares were issued after September 30, 2024.

 

Note 8. Commitments and Contingencies

 

The Company had an aggregate of $26,450 and $24,067, respectively, of unfunded commitments to provide debt financing to its portfolio companies as of September 30, 2024 and December 31, 2023. Such commitments are generally subject to the satisfaction of certain financial and nonfinancial covenants and certain operational metrics. The commitment period for these amounts may be shorter than the maturity date if drawn or funded. These commitments are not reflected in the Company’s consolidated statements of assets and liabilities. Consequently, such commitments result in an element of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities.

 

30

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

A summary of the composition of the unfunded commitments as of September 30, 2024 and December 31, 2023 is shown in the table below.

 

   As of   As of 
   September 30,
2024
   December 31,
2023
 
Alcami Corporation (Alcami)  $548   $891 
Allcat Claims Service, LLC   283    460 
Allentown, LLC   106    233 
American Equipment Holdings LLC   444    - 
American Soccer Company, Incorporated (SCORE)   324    223 
Basel U.S. Acquisition Co., Inc. (IAC)   613    399 
BCI Burke Holding Corp.   618    618 
OAO Acquisitions, Inc. (BearCom)   1,281    1,449 
BLP Buyer, Inc. (Bishop Lifting Products)   635    1,238 
BR PJK Produce, LLC (Keany)   395    482 
Carton Packaging Buyer, Inc.   639    639 
CCFF Buyer, LLC (California Custom Fruits & Flavors, LLC)   3,357    - 
CGI Automated Manufacturing, LLC   1    141 
City Line Distributors, LLC   533    1,121 
DISA Holdings Corp. (DISA)   534    940 
Diverzify Intermediate, LLC   811    - 
EIS Legacy, LLC   -    1,659 
Energy Acquisition LP (Electrical Components International, Inc. - ECI)   281    - 
Envirotech Services, LLC   1,173    - 
FCA, LLC (FCA Packaging)   288    288 
Guardian Dentistry Partners   77    - 
Guided Practice Solutions: Dental, LLC (GPS)   1,026    2,361 
Gulf Pacific Holdings, LLC   154    870 
IF&P Foods, LLC (FreshEdge)   607    237 
Improving Acquisition LLC   327    328 
Krayden Holdings, Inc.   1,812    1,812 
Light Wave Dental Management LLC   190    227 
LSL Industries, LLC (LSL Healthcare)   1,305    1,305 
MacNeill Pride Group Corp.   260    1,184 
ML Buyer, LLC (Mama Lycha Foods, LLC)   879    - 
Phoenix YW Buyer, Inc.   444    - 
Pixel Intermediate, LLC   205    - 
Refocus Management Services, LLC   1,316    - 
The Robinette Company   1,337    - 
Ruff Roofers Buyer, LLC   1,608    2,471 
Salt Dental Collective   442    - 
SGA Dental Partners Holdings, LLC   -    1,121 
Siegel Egg Co., LLC   82    85 
Speedstar Holding LLC   223    - 
Spinrite, Inc.   139    - 
US Anchors Group, Inc. (Mechanical Plastics Corp.)   579    - 
Vehicle Accessories, Inc.   150    - 
Worldwide Produce Acquisition, LLC   424    1,285 
Total unfunded commitments  $26,450   $24,067 

  

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of September 30, 2024 and December 31, 2023, management was not aware of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure.  

 

31

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

Note 9. Earnings Per Share

 

In accordance with the provisions of ASC Topic 260, Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. As of September 30, 2024 and 2023, there were no dilutive shares.

 

The following table sets forth the computation of basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2024 and 2023.

 

   For the three months ended   For the nine months ended 
   September 30,
2024
   September 30,
2023
   September 30,
2024
   September 30,
2023
 
Net increase (decrease) in net assets resulting from operations  $            7,297   $            4,283   $          19,873   $          11,234 
Weighted average shares of common stock outstanding - basic and diluted   

46,712

    29,515    

42,307

    26,096 
Earnings (loss) per share of common stock - basic and diluted  $156   $145   $470   $430 

 

Note 10. Financial Highlights

 

The following per share of common stock data has been derived from information provided in the unaudited financial statements. The following is a schedule of financial highlights for the nine months ended September 30, 2024 and 2023.

 

   For the nine months ended
September 30,
 
   2024
(amounts in
thousands,
except share
and per share
amounts)
   2023
(amounts in
thousands,
except share
and per share
amounts)
 
Per Common Share Operating Performance (1)        
Net Asset Value, Beginning of Period  $5,229   $5,153 
           
Results of Operations:          
Net Investment Income   444    412 
Net Realized and Unrealized Gain (Loss) on investments(2)   25    14 
Net Increase (Decrease) in Net Assets Resulting from Operations   469    426 
           
Dividends to Common Stockholders          
Dividends from Net Investment Income   (438)   (382)
Net Decrease in Net Assets Resulting from Dividends   (438)   (382)
Net Asset Value, End of Period  $5,260   $5,197 
           
Shares Outstanding, End of Period   46,840    31,687 
           
Ratio/Supplemental Data          
Net assets, end of period  $246,369   $164,678 
Weighted-average shares outstanding   42,307    26,096 
Total Return(3)   9.2%   8.5%
Portfolio turnover   7.7%   5.4%
Ratio of operating expenses to average net assets(4)   1.2%   1.6%
Ratio of net investment income (loss) to average net assets(4)   11.5%   10.6%

   

(1) The per common share data was derived by using weighted average shares outstanding.

 

32

 

Kayne DL 2021, Inc.

Notes to Consolidated Financial Statements

(amounts in 000s, except for shares and per share data)

(Unaudited)

 

(2) Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Consolidated Statement of Operations due to share transactions during the period.

 

(3) Total return is calculated as the change in net asset value (“NAV”) per share during the period, plus distributions per share (if any), divided by the beginning NAV per share. The calculation also assumes reinvestment of dividends at actual prices pursuant to the Company’s dividend reinvestment plan. Total return is not annualized.
   
(4) Ratio is annualized.

 

Note 11. Subsequent Events

 

The Company’s management has evaluated subsequent events through the date of issuance of the financial statements included herein. There have been no subsequent events that require recognition or disclosure in these financial statements except as described below.

 

On October 23, 2024, the Company sold 4,754 shares of its common stock for an aggregate offering price of $25,000. The Company has existing subscription agreements with investors for an aggregate capital commitment of $353,535 to purchase shares of common stock ($110,535 is undrawn following this share issuance).

 

On October 15, 2024, the Company paid a dividend of $165 per share to each common stockholder of record as of September 30, 2024. The total distribution was $7,729 and $1,149 was reinvested into the Company through the issuance of 218 shares of common stock.

 

On November 6, 2024, the Board of Directors of the Company declared a dividend to common stockholders in the amount of $139 per share. The dividend of $139 per share will be paid on January 15, 2025 to stockholders of record as of the close of business on December 31, 2024, payable in cash or shares of common stock of the Company pursuant to the Company’s Dividend Reinvestment Plan, as amended.

 

33

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

  

The following discussion and analysis should be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Except as otherwise specified, references to “we,” “us,” “our,” or the “Company” refer to Kayne DL 2021, Inc.

 

Investment Objective, Principal Strategy and Investment Structure

 

Kayne DL 2021, Inc. was formed as a Delaware corporation to make investments in middle-market companies and commenced operations on December 16, 2021. We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act, as amended. In addition, for U.S. federal income tax purposes, we intend to qualify, annually, as a RIC under Subchapter M of the Code.

 

Our investment activities are managed by KA Credit Advisors II, LLC (the “Advisor”), an indirect controlled subsidiary of Kayne Anderson Capital Advisors, L.P. (“Kayne Anderson”), and the Advisor operates within Kayne Anderson’s middle market private credit platform (“KAPC” or “Kayne Anderson Private Credit”). The Advisor is an investment advisor registered with the United States Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended. In accordance with the Investment Advisers Act of 1940, as amended, our Advisor is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring investments, and monitoring our investments and portfolio companies on an ongoing basis. The Advisor benefits from the scale and resources of Kayne Anderson and specifically KAPC.

 

Our investment objective is to generate current income and, to a lesser extent, capital appreciation. We intend to have nearly all of our debt investments in private middle market companies. We use “private” to refer to companies that are not traded on a securities exchange and define “middle market companies” as companies that, in general, generate between $10 million and $150 million of annual earnings before interest, taxes, depreciation and amortization, or EBITDA. Further, we refer to companies that generate between $10 million and $50 million of annual EBITDA as “core middle market companies” and companies that generate between $50 million and $150 million of annual EBITDA as “upper middle market companies.” We typically adjust EBITDA for non-recurring and/or normalizing items to assess the financial performance of our borrowers over time.

 

We intend to achieve our investment objective by investing primarily in first lien senior secured loans, with a secondary focus on unitranche and split-lien loans to middle market companies. Under normal market conditions, we expect at least 90% of our portfolio (including investments purchased with proceeds from borrowings under credit facilities) to be invested in first lien senior secured, unitranche and split-lien loans. Our investment decisions are made on a case-by-case basis. We expect that a majority of these debt investments will be made in core middle market companies and will generally have stated maturities of three to six years. We expect that the loans in which we principally invest will be to companies that have principal business activities in the United States. We determine the location of a company as being in the United States by (i) such company being organized under the laws of one of the states in the United States; or (ii) during its most recent fiscal year, such company derived at least 50% of its revenues or profits from goods produced or sold, investments made, or services performed in the United States or has at least 50% of its assets in the United States.

 

The Advisor executes on our investment objective by (1) accessing the established loan sourcing channels developed by KAPC, which includes an extensive network of private equity firms, other middle market lenders, financial advisors, intermediaries and management teams, (2) selecting investments within our middle market company focus, (3) implementing KAPC’s underwriting process and (4) drawing upon its experience and resources and the broader Kayne Anderson network. KAPC was established in 2011 and manages (directly and through affiliates) assets under management (“AUM”) of approximately $7.1 billion related to middle market private credit as of September 30, 2024.

 

34

 

Recent Developments 

 

On October 15, 2024, we paid a distribution of $165 per share to each common stockholder of record as of September 30, 2024. The total distribution was $7.7 million and $1.1 million was reinvested into the Company through the purchase of 218 shares of common stock.

 

On October 23, 2024, we sold 4,754 shares of common stock for an aggregate offering price of $25.0 million. We have existing subscription agreements with investors for an aggregate capital commitment of $353.5 million to purchase shares of common stock ($110.5 million is undrawn following this share issuance).

 

On November 6, 2024, our Board of Directors declared a distribution of $139 per share to common stockholders. The dividend of $139 per share will be paid on January 15, 2025 to stockholders of record as of the close of business on December 31, 2024, payable in cash or shares of our common stock pursuant to our Dividend Reinvestment Plan, as amended.

 

Portfolio and Investment Activity

 

Our portfolio is currently comprised of a broad mix of loans, with diversity among investment size and industry focus. The Advisor’s team of professionals conducts due diligence on prospective investments during the underwriting process and is involved in structuring the credit terms of our private middle market investments. Once an investment has been made, our Advisor closely monitors that portfolio investment and takes a proactive approach to identify and address sector or company specific risks. The Advisor seeks to maintain a regular dialogue with portfolio company management teams (as well as their owners, the majority of whom are private equity firms, where applicable), reviews detailed operating and financial results on a regular basis (typically monthly or quarterly) and monitors current and projected liquidity needs, in addition to other portfolio management activities. There are no assurances that we will achieve our investment objectives.

 

As of September 30, 2024, we had investments in 67 portfolio companies with an aggregate fair value of approximately $247.8 million, and unfunded commitments to these portfolio companies of $26.4 million, and our portfolio consisted of 100% first lien senior secured loans.

 

As of September 30, 2024, 100% of our debt investments had floating interest rates. Our weighted average yields for debt investments at fair value and amortized cost were 11.8% and 12.0%, respectively.

 

As of September 30, 2024, our portfolio was invested across 22 different industries (Global Industry Classification “GICS”, Level 3 – Industry). The largest industries in our portfolio as of September 30, 2024 were Trading Companies & Distributors, Food Products, Health Care Providers & Services, and Commercial Services & Supplies, which represented, as a percentage of our portfolio of long-term investments, 22.1%, 12.1%, 10.5% and 7.7%, respectively, based on fair value. We are generalist investors and the industries in which our portfolio companies operate may change over time.

 

As of September 30, 2024, our average position size based on commitment (at the portfolio company level) was $4.1 million.

 

As of September 30, 2024, the weighted average and median last twelve months (“LTM”) EBITDA of our portfolio companies were $53.0 million and $36.9 million, respectively, based on fair value1.

 

As of September 30, 2024, the weighted average loan-to-enterprise-value (“LTEV”) of our debt investments at the time of our initial investment was 42.8%, based on par1. LTEV represents the total par value of our debt investment relative to our estimate of the enterprise value of the underlying borrower.

 

1 Excludes investments on watch list, which represent 2.3% of the total fair value of debt investments as of September 30, 2024.

 

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As of September 30, 2024, none of our debt investments in portfolio companies were on non-accrual.

 

As of September 30, 2024, our portfolio companies’ weighted average leverage ratio and weighted average interest coverage ratio (the calculation of which is based on the most recent quarter end or latest available information from the portfolio companies) was of 4.2x and 2.2x, respectively, based on fair value1.

 

As of September 30, 2024, the percentage of our debt investments including at least one financial maintenance covenant was 100% based on fair value.

 

1Excludes investments on watch list, which represent 2.3% of the total fair value of debt investments as of September 30, 2024.

  

Our investment activity for the three months ended September 30, 2024 and 2023 is presented below (information presented herein is at par value unless otherwise indicated).

 

   For the three months ended
September 30,
 
   2024
($ in millions)
   2023
($ in millions)
 
New investments:        
Gross new investments commitments  $28.6   $5.0 
Less: investment commitments sold down, exited or repaid(1)   (8.0)   (2.4)
Net investment commitments  $20.6   $2.6 
           
Principal amount of investments funded:          
Private credit investments  $30.2   $7.7 
Liquid credit investments   -    - 
Total principal amount of investments funded  $30.2   $7.7 
           
Principal amount of investments sold / repaid:          
Private credit investments  $(7.4)  $(2.8)
Liquid credit investments   -    - 
Total principal amount of investments sold or repaid  $(7.4)  $(2.8)
           
Number of new investment commitments   13    2 
Average new investment commitment amount  $2.2   $2.5 
Weighted average maturity for new investment commitments(2)   4.3 years    3.7 years 
Percentage of new debt investment commitments at floating rates   100.0%   100.0%
Percentage of new debt investment commitments at fixed rates   0.0%   0.0%
Weighted average interest rate of new investment commitments(3)   10.9%   11.4%
Weighted average interest rate on investment sold or paid down(4)   11.3%   11.6%

 

(1) Does not include repayments on revolving loans, which may be redrawn.

 

(2) For undrawn delayed draw term loans, the maturity date used is that of the associated term loan.

 

(3) Based on the rate in effect at September 30, 2024 per our Consolidated Schedule of Investments for new commitments entered into during the quarter.
   
(4) Based on the underlying rate if still held at September 30, 2024.  For those investments sold or paid down in full during the year, based on the rate in effect at the time of sale or paid down.

 

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Portfolio Internal Performance Ratings

 

In general, we employ a strategy designed to ensure early detection of potential issues at underlying borrowers, including monthly financial reviews internal tracking memoranda, weekly “watch list” discussions and other like activities. We have designed a risk rating system to aid in our portfolio management efforts where each investment is rated level 1-9, where Level 1 is the “least risky” and Level 9 is the “most risky.” This risk-rating system is quantitative in nature and aggregates criteria such as LTEV, leverage levels and fixed charge coverage ratios (“FCCR”) (each measured at point-in-time and as relates to levels at the close of the investment). 

 

The table below sets forth our fair value of debt investments and number of portfolio companies, including percentage of each total, that are on watch list as of September 30, 2024 and December 31, 2023.

 

As of September 30, 2024   As of December 31, 2023 
Fair Value
($ in millions)
  

 

%

   Number of
Companies
  

 

%

   Fair Value
($ in millions)
  

 

%

   Number of
Companies
  

 

%

 
$5.8    2.3%   2    3.0%  $6.1    3.4%   2    3.9%

 

We use Global Industry Classification Standards (GICS), Level 3 – Industry, for classifying the industry groupings of our portfolio companies. The table below describes long-term investments by industry composition based on fair value as of September 30, 2024 and December 31, 2023.

 

   September 30,
2024
   December 31,
2023
 
Trading companies & distributors   22.1%   21.4%
Food products   12.1%   13.1%
Health care providers & services   10.5%   9.5%
Commercial services & supplies   7.7%   7.1%
Containers & packaging   7.5%   9.0%
Aerospace & defense   4.9%   6.1%
Leisure products   4.9%   3.5%
Professional services   4.3%   4.9%
Automobile components   4.0%   1.5%
IT services   3.8%   5.4%
Personal care products   3.3%   -%
Building products   2.2%   0.9%
Machinery   1.8%   1.7%
Biotechnology   1.8%   2.3%
Chemicals   1.7%   2.4%
Wireless telecommunication services   1.4%   1.9%
Capital markets   1.2%   1.7%
Software   1.2%   1.7%
Diversified telecommunication services   1.0%   2.1%
Insurance   1.0%   1.4%
Textiles, apparel & luxury goods   1.0%   1.5%
Health care equipment & supplies   0.6%   0.9%
    100.0%   100.0% 

 

Results of Operations

 

For the three and nine months ended September 30, 2024 and 2023, our total investment income was derived from our portfolio of investments.

 

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The following table represents the operating results for the three and nine months ended September 30, 2024 and 2023.

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2024   2023   2024   2023 
   ($ in millions)   ($ in millions)   ($ in millions)   ($ in millions) 
Total investment income  $7.66   $4.71   $20.79   $12.33 
Less: Net expenses   (0.70)   (0.55)   (2.02)   (1.58)
 Net investment income   6.96    4.16    18.77    10.75 
Net realized gains (losses) on investments   -    -    -    - 
Net change in unrealized gains (losses) on investments   0.34    0.12    1.10    0.49 

Net increase (decrease) in net assets resulting from operations

  $7.30   $4.28   $19.87   $11.24 

 

Investment Income

 

Investment income for the three and nine months ended September 30, 2024 totaled $7.7 million and $20.8 million, respectively, and consisted primarily of interest income on our debt investments. Investment income for the three and nine months ended September 30, 2023 totaled $4.7 million and $12.3 million, respectively, and consisted primarily of interest income on our debt investments. For the three and nine months ended September 30, 2024, we had $0.05 million and $0.08 million, respectively, of PIK interest included in interest income. There was no PIK interest for the three and nine months ended September 30, 2023. As of September 30, 2024 and 2023, all debt investments were income producing, and there were no loans on non-accrual status.

 

Expenses

 

Operating expenses for the three and nine months ended September 30, 2024 and 2023 were as follows:

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2024   2023   2024   2023 
   ($ in millions)   ($ in millions)   ($ in millions)   ($ in millions) 
Interest and debt financing expenses  $0.03   $0.04   $0.12   $0.18 
Management fees   0.45    0.27    1.19    0.74 
Other operating expenses   0.18    0.20    0.59    0.55 
Directors fees   0.04    0.04    0.12    0.11 
Total expenses  $0.70   $0.55   $2.02   $1.58 

 

Net Unrealized Gains (Losses) on Investments

 

We fair value our portfolio investments quarterly and any changes in fair value are recorded as unrealized gains or losses. During the three and nine months ended September 30, 2024 and 2023, net unrealized gains (losses) on our investment portfolio were comprised of the following:

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2024   2023   2024   2023 
   ($ in millions)   ($ in millions)   ($ in millions)   ($ in millions) 
Unrealized gains on investments  $1.08   $0.42   $2.25   $1.24 
Unrealized (losses) on investments   (0.74)   (0.30)   (1.15)   (0.75)
Net change in unrealized gains (losses) on investments  $0.34   $0.12   $1.10   $0.49 

 

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For these three-month periods ended September 30, 2024 and 2023, the top five largest contributors to the change in unrealized gains and change in unrealized losses on investments are presented in the following tables.

 

   For the three months ended 
   September 30,
2024
 
   ($ in millions) 
Portfolio Company    
Dusk Acquisition II Corporation (Motors & Armatures, Inc. – MARS)  $0.15 
WAM CR Acquisition, Inc. (Wolverine)   0.15 
American Soccer Company, Incorporated (SCORE)   0.14 
TL Alpine Holding Corp. (Air Distribution Technologies Inc.)   0.08 
ML Buyer, LLC (Mama Lycha Foods, LLC)   0.07 
Other portfolio companies unrealized gains   0.49 
Other portfolio companies unrealized (losses)   (0.38)

SGA Dental Partners Holdings, LLC

   (0.06)
Innopak Industries, Inc.   (0.06)
BR PJK Produce, LLC (Keany)   (0.07)
Allentown, LLC   (0.08)
Siegel Egg Co., LLC   (0.09)
Total Unrealized Appreciation (Depreciation), net  $0.34 

 

   For the three months ended 
   September 30,
2023
 
   ($ in millions) 
Portfolio Company    
Genuine Cable Group, LLC  $0.15 
City Line Distributors, LLC   0.07 
BCDI Meteor Acquisition, LLC (Meteor)   0.05 
BR PJK Produce, LLC (Keany)   0.04 
BCI Burke Holding Corp.   0.03 
Other portfolio companies unrealized gains   0.08 
Other portfolio companies unrealized (losses)   (0.15)
Siegel Egg Co., LLC   (0.02)
Process Insights, Inc.   (0.02)
Brightview, LLC   (0.02)
Centerline Communications, LLC   (0.04)
IF&P Foods, LLC (FreshEdge)   (0.05)
Total Unrealized Appreciation (Depreciation), net  $0.12 

 

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For these nine-month periods ended September 30, 2024 and 2023, the top five largest contributors to the change in unrealized gains and change in unrealized losses on investments are presented in the following tables.

 

   For the nine months ended 
   September 30,
2024
 
   ($ in millions) 
Portfolio Company    
Energy Acquisition LP (Electrical Components International, Inc. - ECI)  $0.16 
Dusk Acquisition II Corporation (Motors & Armatures, Inc. – MARS)   0.15 
WAM CR Acquisition, Inc. (Wolverine)   0.15 
Envirotech Services, LLC   0.14 
MVP VIP Borrower, LLC   0.14 
Other portfolio companies unrealized gains   1.51 
Other portfolio companies unrealized (losses)   (0.59)
SGA Dental Partners Holdings, LLC   (0.07)
Engineered Fastener Company, LLC (EFC International)   (0.08)
Allentown, LLC   (0.08)
Universal Marine Medical Supply International, LLC (Unimed)   (0.09)
Siegel Egg Co., LLC   (0.24)
Total Unrealized Appreciation (Depreciation), net  $1.10 

 

   For the nine months ended 
   September 30,
2023
 
   ($ in millions) 
Portfolio Company    
Light Wave Dental Management LLC  $0.17 
Krayden Holdings, Inc.   0.15 
Engineered Fastener Company, LLC (EFC International)   0.15 
Worldwide Produce Acquisition, LLC   0.14 
Alcami Corporation (Alcami)   0.10 
Other portfolio companies unrealized gains   0.53 
Other portfolio companies unrealized (losses)   (0.33)
Improving Acquisition LLC   (0.04)
CGI Automated Manufacturing, LLC   (0.04)
Centerline Communications, LLC   (0.08)
IF&P Foods, LLC (FreshEdge)   (0.11)
Siegel Egg Co., LLC   (0.15)
Total Unrealized Appreciation (Depreciation), net  $0.49 

 

Financial Condition, Liquidity and Capital Resources

 

Our liquidity and capital resources are generated primarily from the net proceeds of any offering of our shares of common stock and from cash flows from interest and fees earned from our investments and principal repayments and proceeds from sales of our investments. Our primary use of cash will be investments in portfolio companies, payments of our expenses and payment of cash distributions to our stockholders.

 

In accordance with the 1940 Act, we are required to meet a coverage ratio of total assets (less total liabilities other than indebtedness) to total borrowings and other senior securities (and any preferred stock that we may issue in the future) of at least 150%. If this ratio declines below 150%, we cannot incur additional leverage and could be required to sell a portion of our investments to repay some leverage when it is disadvantageous to do so. As of September 30, 2024 and December 31, 2023, respectively, we did not have any borrowings outstanding under our subscription credit facility.   We do not routinely use leverage, and there are many days when there are no borrowings outstanding under our subscription credit facility.

 

Over the next twelve months, we expect that cash and cash equivalents, taken together with our available capacity under our credit facilities, will be sufficient to conduct anticipated investment activities. Beyond twelve months, we expect that our cash and liquidity needs will continue to be met by cash generated from our ongoing operations as well as financing activities.

 

As of September 30, 2024, we did not have any borrowings outstanding under our subscription credit facility and had cash and cash equivalents of $4.1 million (including short-term investments). We do not routinely use leverage, and there are many days when there are no borrowings outstanding under our subscription credit facility. As of November 7, 2024, we did not have any borrowings outstanding under our subscription credit facility and had cash and cash equivalents of $23.3 million.

 

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Capital Contributions

 

During the nine months ended September 30, 2024, we issued and sold 9,455 shares of our common stock related to capital called at an aggregate purchase price of $50.0 million. During the nine months ended September 30, 2023, we issued and sold 9,549 shares of our common stock related to capital called at an aggregate purchase price of $50.0 million. As of November 7, 2024, we had aggregate capital commitments of $353.5 million and undrawn capital commitments from investors of $110.5 million ($243.0 million or 68.7% funded).

 

Credit Facility

 

Subscription Credit Facility. We are party to a senior secured revolving credit facility (the “Subscription Credit Facility”) that has a total commitment of $25 million and a maturity date of February 21, 2025.  The Subscription Credit Facility permits us to borrow up to $25 million, subject to availability under the borrowing base which is calculated based on the unused capital commitments of the investors meeting various eligibility requirements. The interest rate on the Subscription Credit Facility is equal to SOFR plus an applicable spread of 2.25% per annum with no floor. We are also required to pay a commitment fee of 0.25% per annum on any unused portion of the Subscription Credit Facility.

 

Contractual Obligations

 

We did not have any indebtedness outstanding under our Subscription Credit Facility as of September 30, 2024. 

  

Off-Balance Sheet Arrangements

 

As of September 30, 2024 and December 31, 2023, we had an aggregate $26.4 million and $24.1 million, respectively, of unfunded commitments to provide debt financing to our portfolio companies. Such commitments are generally subject to the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in our financial statements. Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any other off-balance sheet financings or liabilities.

 

Critical Accounting Estimates

 

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described below. The critical accounting policies should be read in conjunction with our risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in this Quarterly Report. See Note 2 to our consolidated financial statements for the nine months ended September 30, 2024, for more information on our critical accounting policies.

 

Investment Valuation

 

Traded Investments (Level 1 or Level 2)

 

Investments for which market quotations are readily available will typically be valued at those market quotations. Traded investments such as corporate bonds, preferred stock, bank notes, loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker, the agent bank, syndicate bank or principal market maker. When price quotes for investments are not available, or such prices are stale or do not represent fair value in the judgment of our Advisor, fair market value will be determined using our Advisor’s valuation process for investments that are privately issued or otherwise restricted as to resale.

 

Infrequently, we may also invest, to a lesser extent, in equity securities purchased in conjunction with debt investments. While we anticipate these equity securities to be issued by privately held companies, we may hold equity securities that are publicly traded. Equity securities listed on any exchange other than the NASDAQ Stock Market, Inc. (“NASDAQ”) are valued, except as indicated below, at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities admitted to trade on the NASDAQ are valued at the NASDAQ official closing price. Equity securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Equity securities traded in the over-the-counter market, but excluding securities admitted to trading on the NASDAQ, are valued at the closing bid prices.

 

41

 

Non-Traded Investments (Level 3)

 

Investments that are privately issued or otherwise restricted as to resale, as well as any security for which (a) reliable market quotations are not available in the judgment of our Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in the judgment of our Advisor is stale or does not represent fair value, shall each be valued in a manner that most fairly reflects fair value of the security on the valuation date. We expect that a significant majority of our investments will be Level 3 investments. Unless otherwise determined by the Advisor, the following valuation process is used for our Level 3 investments:

 

  Valuation Designee. The applicable investments will be valued no less frequently than quarterly by the Advisor, with new investments valued at the time such investment was made. The value of each Level 3 investment will be initially reviewed by the persons responsible for such portfolio company or investment. The Advisor will use a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs to determine a preliminary value. The Advisor will specify the titles of the persons responsible for determining the fair value of Company investments, including by specifying the particular functions for which they are responsible, and will reasonably segregate fair value determinations from the portfolio management of the Company such that the portfolio manager(s) may not determine, or effectively determine by exerting substantial influence on, the fair values ascribed to portfolio investments.

 

  Valuation Firm. Quarterly, a third-party valuation firm engaged by the Advisor reviews the valuation methodologies and calculations employed for each of the Company’s investments that the Advisor has placed on the “watch list” and approximately 25% of the Company’s remaining investments. The third-party valuation firm will review and independently value all of the Level 3 investments at least once per year, on a rolling twelve-month basis. The quarterly report issued by the third-party valuation firm will provide positive assurance on the fair values of the investments reviewed.

 

  Oversight. The Board has appointed the Advisor as the valuation designee for the Company for purposes of making determinations of fair value as permitted by Rule 2a-5 under the 1940 Act. The Audit Committee shall aid the Board in overseeing the Advisor’s fair valuation of securities that are not publicly traded or for which current market values are not readily available. The Audit Committee shall meet quarterly to review the fair value determinations, processes and written reports of the Advisor as part of the Board’s oversight responsibilities.

 

Refer to Note 5 – Fair Value – for more information on the Company’s valuation process.

 

Revenue Recognition

 

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. OIDs, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income.

 

Related Party Transactions

 

Investment Advisory Agreement. On December 16, 2021, we entered into the Investment Advisory Agreement with our Advisor. On March 6, 2024, the Board approved an additional one-year term of the Investment Advisory Agreement from March 16, 2024 to March 15, 2025. Our Advisor serves as our investment advisor in accordance with the terms of our Investment Advisory Agreement. Payments under our Investment Advisory Agreement in each reporting period will consist of a management fee equal to a percentage of the fair market value of investments, including, in each case, assets purchased with borrowings under credit facilities, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase.

 

For services rendered under the Investment Advisory Agreement, we will pay a management fee quarterly in arrears to our Advisor based on the of the fair market value of our investments including, in each case, assets purchased with borrowings under credit facilities, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase.

 

42

 

Administration Agreement. On December 16, 2021, we entered into an Administration Agreement with our Advisor, which serves as our Administrator, pursuant to which the Administrator will furnish us with administrative services necessary to conduct our day-to-day operations. On March 6, 2024, the Board approved an additional one-year term of the Administration Agreement through March 15, 2025.

 

The Administrator will be reimbursed for administrative expenses it incurs on our behalf in performing its obligations. As we reimburse the Administrator for its expenses, we will indirectly bear such cost. The Administrator engaged Ultimus Fund Solutions, LLC under a sub-administration agreement to assist the Administrator in performing certain of its administrative duties. The Administrator may enter into additional sub-administration agreements with third-parties to perform other administrative and professional services on behalf of the Administrator.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We are subject to financial market risks, including changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

 

Assuming that the consolidated statement of assets and liabilities as of September 30, 2024 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact ($ in millions) of hypothetical base rate changes in interest rate (considering interest rate floors for floating rate instruments).

 

Change in Interest Rates  Increase
(Decrease)
in Interest
Income
   Increase
(Decrease)
in Interest
Expense
   Net Increase
(Decrease)
in Net
Investment
Income
 
Down 200 basis points  $           (5.0)  $        (0.0)  $      (5.0)
Down 100 basis points  $(2.5)  $(0.0)  $(2.5)
Up 100 basis points  $2.5   $0.0   $2.5 
Up 200 basis points  $5.0   $0.0   $5.0 

 

The data in the table is based on the Company’s current statement of assets and liabilities.

 

We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of September 30, 2024 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic United States Securities and Exchange Commission (the “SEC”) filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

 

Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Neither we nor our Advisor is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our Advisor.

 

From time to time, we, or our Advisor, may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

 

From time to time we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

 

Item 1A. Risk Factors.

 

In addition to the other information set forth in this report, you should carefully consider the risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

As set forth in the table below (dollars in thousands, except per share and share amounts), during the nine months ended September 30, 2024, we issued and sold 9,455 shares of common stock at an aggregate offering amount of approximately $50.0 million. The issuance of the shares of common stock was exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) and Rule 506(b) of Regulation D thereof and previously reported by us on our current reports on Form 8-K. The Company relied, in part, upon representations from the investors in the subscription agreements that each investor was an accredited investor as defined in Regulation D under the Securities Act. We did not engage in general solicitation or advertising, and did not offer securities to the public, in connection with such issuances and sales.

 

Common stock issue date  Offering
price per
share
   Common
stock shares
issued
   Aggregate
offering
amount
 
February 15, 2024  $5,308    4,710   $25,000 
July 3, 2024  $5,269    4,745   $25,000 
         9,455   $50,000 

 

Item 3. Default Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

44

 

Item 6. Exhibits.

 

The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this Report.

 

Exhibit Index    
3.1   Certificate of Incorporation (1)
3.2   Amended and Restated Bylaws (2)
10.1   Investment Advisory Agreement (1)
10.2   Amendment to Investment Advisory Agreement (4)
10.3   Administration Agreement (1)
10.4   License Agreement (1)
10.5   Indemnification Agreement (1)
10.6   Custody Agreement (1)
10.7   Subscription Agreement (1)
10.8   Subscription Credit Agreement (3)
10.9   Second Amendment to Subscription Credit Agreement (5)
31.1*   Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*   Inline XBRL Instance Document
101.SCH*   Inline XBRL Taxonomy Extension Schema Document
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

* Filed herewith.

 

(1) Incorporated by reference from the Company’s Amendment No. 1 to Form 10, as filed with the Securities and Exchange Commission on May 11, 2021.

 

(2) Incorporated by reference from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on August 15, 2022.

 

(3) Incorporated by reference from the Company’s Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 3, 2022.

 

(4) Incorporated by reference from the Company’s Form 10-K, as filed with the Securities and Exchange Commission on March 13, 2023.

 

(5) Incorporated by reference from the Company’s Form 8-K, as filed with the Securities and Exchange Commission on February 28, 2024.

 

45

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Kayne DL 2021, Inc.  
   
Date: November 13, 2024  
     
    /s/ Douglas L. Goodwillie
  Name:  Douglas L. Goodwillie
  Title: Co-Chief Executive Officer
    (Co-Principal Executive Officer)
     
Date: November 13, 2024  
     
    /s/ Kenneth B. Leonard
  Name:  Kenneth B. Leonard
  Title: Co-Chief Executive Officer
    (Co-Principal Executive Officer)
     
Date: November 13, 2024  
   
    /s/ Terry A. Hart
  Name: Terry A. Hart
  Title: Chief Financial Officer and Treasurer
    (Principal Financial and Accounting Officer)

 

 

46

 

NONE 141 149 412 444 As of December 31, 2023, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company. The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method. . As of December 31, 2023, the tax cost of the Company’s investments approximates their amortized cost. Loan contains a variable rate structure, that may be subject to an interest rate floor. 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